Question

CALCULATOR PRINTER VERSION Problem 10-3A a, b1, C (Part Level Submission) (Video) Ratchet Company uses budgets in controlling costs. The August 2020 budget report for the company's Assembling Department is as follows. RATCHET COMPANY Budget Report Assembling Department For the Month Ended August 31, 2020 Difference Favorable Unfavorable Neither Favorable Manufacturing Costs Budget Actual nor Unfavorable Variable costs Direct materials $50,740 $49,740 $1,000 Favorable Direct labor 54,280 51,480 2,800 Favorable Indirect materials 25,960 26,260 300 Unfavorable Indirect labor 22,420 21,940 480 Favorable Utilities 14,750 14,580 170 Favorable Maintenance 5,900 6,120 220 Unfavorable Total variable 174,050 170,120 3,930 Favorable Fixed costs Rent 10,000 10,000 -- Neither Favorable nor Unfavorable Supervision 18.200 18.200 -- Neither Favorable nor Unfavorable Depreciation 5,200 5.200 -- Neither Favorable nor Unfavorable Total fixed 33,400 33,400 O-Neither Favorable nor Unfavorable Totalcoats $207,450 $203.520 53.930 favorable The monthly budget amounts in the report were based on an expected production of 59,000 units per month or 208.000 units per year. The Assembling Department manage s pleased with the report and expects a raise, or at least praise for a job well done. The company president, however unhady with the results for August because only 57.000 units were produced

Answer 1

Solution a:

Budgeted Variable cost per unit = Total variable cost / Budgeted units = $174050 / 59000 = $2.95 per unit

Cost formula is $33,400 + Variable cost of $2.95 per unit

Solution b:

Ratchet company
Assembling Department
Flexible budget report
For the month ended August 31, 2020
Particulars	Budget	Actual cost	Difference	Favorable / Unfavorable / Neither favorable nor unfavorable
Units of Production	57000	57000
Variable overhead costs:
Direct materials	$49,020.00	$49,740.00	$720.00	Unfavorable
Direct Labor	$52,440.00	$51,480.00	$960.00	Favorable
Indirect Materials	$25,080.00	$26,260.00	$1,180.00	Unfavorable
Indirect labor	$21,660.00	$21,940.00	$280.00	Unfavorable
Utilities	$14,250.00	$14,580.00	$330.00	Unfavorable
Maintenance	$5,700.00	$6,120.00	$420.00	Unfavorable
Total Variable	$1,68,150.00	$1,70,120.00	$1,970.00	Unfavorable
Fixed costs:
Rent	$10,000.00	$10,000.00	$0.00	Neither Favorable nor Unfavorable
Supervision	$18,200.00	$18,200.00	$0.00	Neither Favorable nor Unfavorable
Depreciation	$5,200.00	$5,200.00	$0.00	Neither Favorable nor Unfavorable
Total Fixed	$33,400.00	$33,400.00	$0.00	Neither Favorable nor Unfavorable
Total Costs	$2,01,550.00	$2,03,520.00	$1,970.00	Unfavorable