Question

Problem 22-3A (Part Level Submission) 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 Unfavorable Neither Favorable Manufacturing Costs Budget Actual nor Unfavorable Variable costs Direct materials 551,200 $50,200 $1,000 Favorable Direct labor 57,500 54,200 3,400 Favorable Indirect materials 26,880 26,980 100 Unfavorable Indirect labor 19,200 18,740 460 Favorable Utilities 16,000 15,830 170 Favorable Maintenance 11,520 11,780 260 Unfavorable Total variable 182,400 177,730 4,670 Favorable Fixed costs Rent 11,200 11,200 -- Neither Favorable nor Unfavorable Supervision 18,300 18,300 -- Neither Favorable nor Unfavorable Depreciation 7,400 7,400 -- Neither Favorable nor Unfavorable Total fixed 36,900 36,900 -0- Neither Favorable nor Unfavorable Total costs $219,300 $ 214,630 54,670 Favorable The monthly budget amounts in the report were based on an expected production of 64,000 units per month or 768,000 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 62,000 units were produced. (a) & (b) Your answer is correct. (a) State the total monthly budgeted cost formula. (Round cost per unit to 2 decimal places, e.g. 1.25.) The formula is = 36909 - variable costs of 285 per unit.

Answer 1

Answer c.

RATCHET COMPANY Assembling Department Flexible Budget Report For the Month Ended September 30, 2017 Budget Actual 68000 68000 Difference Units Variable Costs Direct Materials Direct Labor Indirect Materials Indirect Labor Utilities Maintenance Total Variable Costs Fixed Costs Rent Supervision Depreciation Total Fixed Costs Total Costs 54400 61200 28560 20400 17000 12240 193800 55220 59620 29678 20614 17413 12958 195503 820 1580 1118 214 413 718 1703 Unfavorable Favorable Unfavorable Unfavorable Unfavorable Unfavorable Unfavorable 11200 18300 7400 36900 230700 11200 18300 7400 36900 232403 Neither Favorable Nor Unfavorable Neither Favorable Nor Unfavorable Neither Favorable Nor Unfavorable Neither Favorable Nor Unfavorable Unfavorable 1703

Budget:

Units produced = 64,000

Direct materials per unit = $51,200 / 64,000
Direct materials per unit = $0.80

Direct labor per unit = $57,600 / 64,000
Direct labor per unit = $0.90

Indirect materials per unit = $26,880 / 64,000
Indirect materials per unit = $0.42

Indirect labor per unit = $19,200 / 64,000
Indirect labor per unit = $0.30

Utilities per unit = $16,000 / 64,000
Utilities per unit = $0.25

Maintenance per unit = $11,520 / 64,000
Maintenance per unit = $0.18