Question

Problem 22-3A 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 For the Month Ended August 31, 2017 Difference Unfavorable Neither Favorable nor Unfavorable Manufacturing Costs Budget Actual Variable costs Direct materials Direct labor Indirect materials Indirect labor Utilities Maintenance $50,020 $48,920 $1,100 Favorable 54,900 52,000 2,900 Favorable 29,280 29,580 300 Unfavorable 20,740 20,290 450 Favorable 21.350 21,180 170 Favorable 7,320 7,590 270 Unfavorable Total variable 183,610 179,560 4,050 Favorable Fixed costs Rent Supervision Depreciation 12,800 12,800 0-Neither Favorable nor Unfavorable 17.400 7,400 0 Neither Favorable nor Unfavorable 7,500 7,500 0- Neither Favorable nor Unfavorable 37,700 37,700 -0- Neither Favorable nor Unfavorable Total fixed Total costs $221,310 $217,260 S4,050 Favorable The monthly budget amounts in the report were based on an expected production of 61,000 units per month or 732,000 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 59,000 units were produced. Your answer is partially correct. Try again. (a) State the total monthly budgeted cost formula. (Round cost per unit to 2 decimal places, e.g. 1.25.) The formula is - + variable costs of per unit.

Answer 1

Total monthly budgeted cost formula is

$37,700 + $3.01 per unit  

Flexible budget for 59,000 units is:

Ratchet Company
Flexible Budget Report
Assembling Department
For the month ended August 31, 2017
	59,000	59,000
Manufacturing Costs	Budget	Actual	Difference	Favorable (F) or Unfavorable (U)?
Variable costs:
Direct materials	48,380	48,920	-540	U
Direct labor	53,100	52,000	1100	F
Indirect materials	28,320	29,580	-1260	U
Indirect labor	20,060	20,290	-230	U
Utilities	20,650	21,180	-530	U
Maintenance	7,080	7,590	-510	U
Total variable costs	177,590	179,560	-1970	U
Fixed costs:
Rent	12,800	12,800	0
Supervision	17,400	17,400	0
Depreciation	7,500	7,500	0
Total fixed costs	37,700	37,700	0
Total costs	215,290	217,260	-1970	U

Ratchet Company
Flexible Budget Report
Assembling Department
For the month ended August 31, 2017
	65,000	65,000
Manufacturing Costs	Budget	Actual	Difference	Favorable (F) or Unfavorable (U)?
Variable costs:
Direct materials	48,380	48,920	-540	U
Direct labor	53,100	52,000	1100	F
Indirect materials	28,320	29,580	-1260	U
Indirect labor	20,060	20,290	-230	U
Utilities	20,650	21,180	-530	U
Maintenance	7,080	7,590	-510	U
Total variable costs	177,590	179,560	-1970	U
Fixed costs:
Rent	12,800	12,800	0
Supervision	17,400	17,400	0
Depreciation	7,500	7,500	0
Total fixed costs	37,700	37,700	0
Total costs	215,290	217,260	-1970	U