Ratchet Company uses budgets in controlling costs. The August 2017 budget report
ID: 2554283 • 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 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 $53,760 $52,760 $1,000 Favorable 61,440 58,340 3,100 Favorable 25,600 25,700 100 Unfavorable 19,200 18,730 470 Favorable 22,400 22,240 160 Favorable 7,680 7,940 260 Unfavorable Total variable 190,080 185,710 4,370 Favorable Fixed costs Rent Supervision Depreciation 16,100 16,100 5,400 5,400 32,000 32,000 10,500 10,500 0- Neither Favorable nor Unfavorable -0- Neither Favorable nor Unfavorable -0- Neither Favorable nor Unfavorable -0- Neither Favorable nor Unfavorable Total fixed Total costs $222,080 $217,710 $4,370 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 producedExplanation / Answer
Answer:
1
State the total monthly budgeted cost formula
total monthly budgeted cost formula
=Fixed cist+ variable cost
=32000+ (190080/64000) * Actual Production units
=32000+ 2.97*62000
total monthly budgeted cost formula =32000+ 2.97*62000
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2
RATCHET COMPANY
Flexible Budget Report
Assembling Department
For the Month Ended August 31, 2017
Difference
Favorable
Manufacturing Costs
Actual
Unfavorable
Flexible
Neither Favorable
Budget
nor Unfavorable
Variable costs
Direct materials
$52,080
$52,760
$680
Unfavorable
Direct labor
$59,520
58,340
$1,180
Favorable
Indirect materials
$24,800
25,700
$900
Unfavorable
Indirect labor
$18,600
18,730
$130
Unfavorable
Utilities
$21,700
22,240
$540
Unfavorable
Maintenance
$7,440
7,940
$500
Unfavorable
Total variable
$184,140
185,710
$1,570
Unfavorable
Fixed costs
Rent
10,500
10,500
0
Neither Favorable nor Unfavorable
Supervision
16,100
16,100
0
Neither Favorable nor Unfavorable
Depreciation
5,400
5,400
0
Neither Favorable nor Unfavorable
Total fixed
32,000
32,000
0
Neither Favorable nor Unfavorable
Total costs
$216,140
$217,710
$1,570
Unfavorable
RATCHET COMPANY
Flexible Budget Report
Assembling Department
For the Month Ended August 31, 2017
Difference
Favorable
Manufacturing Costs
Actual
Unfavorable
Flexible
Neither Favorable
Budget
nor Unfavorable
Variable costs
Direct materials
$52,080
$52,760
$680
Unfavorable
Direct labor
$59,520
58,340
$1,180
Favorable
Indirect materials
$24,800
25,700
$900
Unfavorable
Indirect labor
$18,600
18,730
$130
Unfavorable
Utilities
$21,700
22,240
$540
Unfavorable
Maintenance
$7,440
7,940
$500
Unfavorable
Total variable
$184,140
185,710
$1,570
Unfavorable
Fixed costs
Rent
10,500
10,500
0
Neither Favorable nor Unfavorable
Supervision
16,100
16,100
0
Neither Favorable nor Unfavorable
Depreciation
5,400
5,400
0
Neither Favorable nor Unfavorable
Total fixed
32,000
32,000
0
Neither Favorable nor Unfavorable
Total costs
$216,140
$217,710
$1,570
Unfavorable
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