Ratchet Company uses budgets in controlling costs. The August 2017 budget report
ID: 2531878 • Letter: R
Question
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 nor Unfavorable Manufacturing Costs Budget Actual Variable costs Direct materials Direct labor Indirect materials Indirect labor Utilities Maintenance $49,600 $48,500 1,100 Favorable 57,040 54,040 3,000 Favorable 27,280 27,580 300 Unfavorable 22,320 21,910 410 Favorable 15,500 15,390 110 Favorable 7,440 7,630 190 Unfavorable Total variable 179,180 175,050 4,130 Favorable Fixed costs 11,500 11,500 0- Neither Favorable nor Unfavorable 17,10017,100 -0- Neither Favorable nor Unfavorable -0- Neither Favorable nor Unfavorable 35,700 35,700 0- Neither Favorable nor Unfavorable Rent Supervision Depreciation 7,100 7,100 Total fixed Total costs $214,880 $210,750 $4,130 Favorable The monthly budget amounts in the report were based on an expected production of 62,000 units per month or 744,000 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 60,000 units were produced (a) & (b) (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.Explanation / Answer
Answer 1. The formula is: Y = $35,700 + Variable costs of $2.89 per unit Answer 2. RATCHET COMPANY Assembling Department Flexible Budget Report For the Month Ended Aug 31, 2017 Budget Actual Difference No. of Units Produced 60,000.00 60,000.00 Variable Costs Direct Materials 48,000.00 48,500.00 500.00 Unfavourable Direct Labor 55,200.00 54,040.00 1,160.00 Favourable Indirect Materials 26,400.00 27,580.00 1,180.00 Unfavourable Indirect Labor 21,600.00 21,910.00 310.00 Unfavourable Utilities 15,000.00 15,390.00 390.00 Unfavourable Maintenance 7,200.00 7,630.00 430.00 Unfavourable Total Variable Costs 173,400.00 175,050.00 1,650.00 Unfavourable Fixed Costs Rent 11,500.00 11,500.00 - Neither Favourable nor Unfavourable Supervision 17,100.00 17,100.00 - Neither Favourable nor Unfavourable Deptreciation 7,100.00 7,100.00 - Neither Favourable nor Unfavourable Total Fixed Costs 35,700.00 35,700.00 - Neither Favourable nor Unfavourable Total Costs 209,100.00 210,750.00 1,650.00 Unfavourable Answer c. RATCHET COMPANY Assembling Department Flexible Budget Report Budget Actual Difference No. of Units Produced 66,000.00 66,000.00 Variable Costs Direct Materials 52,800.00 58,685.00 5,885.00 Unfavourable Direct Labor 60,720.00 65,388.40 4,668.40 Unfavourable Indirect Materials 29,040.00 33,371.80 4,331.80 Unfavourable Indirect Labor 23,760.00 26,511.10 2,751.10 Unfavourable Utilities 16,500.00 18,621.90 2,121.90 Unfavourable Maintenance 7,920.00 9,232.30 1,312.30 Unfavourable Total Variable Costs 190,740.00 211,810.50 21,070.50 Unfavourable Fixed Costs Rent 11,500.00 11,500.00 - Neither Favourable nor Unfavourable Supervision 17,100.00 17,100.00 - Neither Favourable nor Unfavourable Deptreciation 7,100.00 7,100.00 - Neither Favourable nor Unfavourable Total Fixed Costs 35,700.00 35,700.00 - Neither Favourable nor Unfavourable Total Costs 226,440.00 247,510.50 21,070.50 Unfavourable
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