State total budgeted cost formula, and prepare flexible budget s for 2 time periods

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State total budgeted cost formula, and prepare flexible budget s for 2 time periods
Ratchet Company uses budgets in controlling costs. The August 2017 budget report for the company’s Assembling
Department is as follows.
Ratchet Company
Budget Report
Assembling Department
For the Month Ended August 31, 2017
Difference
Favorable F
Manufacturing Cost Budget Actual Unfavorable U
Variable costs
   Direct materials $    48,000       47,000 $1,000 F
   Direct labor        54,000       51,200 2,800 F
   Indirect materials        24,000       24,200 200 U
   Indirect labor        18,000       17,500 500 F
   Utilities        15,000       14,900 100 F
   Maintenance        12,000       12,400 400 U
     Total variable      171,000     167,200 3,800 F
Fixed costs
   Rent        12,000       12,000 0
   Supervision        17,000       17,000 0
   Depreciation          6,000          6,000 0
     Total fixed        35,000       35,000 0
Total costs $ 206,000 $ 202,200 $3,800 F
The monthly budget amounts in the report were based on an expected production of 60,000 units per month
or 720,000 units per year. The Assembling Department manager is pleased with the report and expects a raise,
or at least praise for a job well done. The company president, however, is unhappy with the results for August
because only 58,000 units were produced.
Instructions
1. Assume that the number of units produced in September changed to 68,000. Revise
the flexible budget report for September assuming (1) each variable cost was 12%
higher than its actual cost in August and (s) fixed costs remain the same in September
as in August.

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Darshita6.14K 0 Comments

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