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Ratchet Company uses budgets in controlling costs

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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

 

Manufacturing Costs

 

Budget

 

Actual

Favorable

Unfavorable

Neither Favorable

nor Unfavorable

Variable costs   Direct materials$48,380

$47,280

$1,100

Favorable   Direct labor57,820

54,520

3,300

Favorable   Indirect materials25,960

26,060

100

Unfavorable   Indirect labor21,240

20,790

450

Favorable   Utilities20,650

20,510

140

Favorable   Maintenance7,080

7,190

110

Unfavorable      Total variable181,130

176,350

4,780

FavorableFixed costs   Rent12,100

12,100

-0-

Neither Favorable nor Unfavorable   Supervision19,000

19,000

-0-

Neither Favorable nor Unfavorable   Depreciation7,300

7,300

-0-

Neither Favorable nor Unfavorable      Total fixed38,400

38,400

-0-

Neither Favorable nor UnfavorableTotal costs$219,530

$214,750

$4,780

Favorable

The monthly budget amounts in the report were based on an expected production of 59,000 units per month or 708,000 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 57,000 units were produced.

(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.

(b) Prepare a budget report for August using flexible budget data. (List variable costs before fixed costs.)

 

RATCHET COMPANY

Assembling Department

Flexible Budget Report

For the Month Ended August 31, 2020

Difference

Budget

Actual Costs

Favorable

Unfavorable

Neither Favorable

nor Unfavorable

 

Depreciation

Direct Labor

Direct Materials

Fixed Costs

Indirect Labor

Indirect Materials

Maintenance

Rent

Supervision

Total Costs

Total Fixed Costs

Total Variable Costs

Units

Utilities

Variable Costs

 

 

 

Depreciation

Direct Labor

Direct Materials

Fixed Costs

Indirect Labor

Indirect Materials

Maintenance

Rent

Supervision

Total Costs

Total Fixed Costs

Total Variable Costs

Units

Utilities

Variable Costs

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

$

$

$

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

 

Depreciation

Direct Labor

Direct Materials

Fixed Costs

Indirect Labor

Indirect Materials

Maintenance

Rent

Supervision

Total Costs

Total Fixed Costs

Total Variable Costs

Units

Utilities

Variable Costs

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

 

Depreciation

Direct Labor

Direct Materials

Fixed Costs

Indirect Labor

Indirect Materials

Maintenance

Rent

Supervision

Total Costs

Total Fixed Costs

Total Variable Costs

Units

Utilities

Variable Costs

$

$

$

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

 

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In September, 63,000 units were produced. Prepare the budget report using flexible budget data, assuming (1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in September as in August. (List variable costs before fixed costs.)

 

RATCHET COMPANY

Assembling Department

Flexible Budget Report

For the Month Ended September 30, 2020

Difference

Budget

Actual Costs

Favorable

Unfavorable

Neither Favorable

nor Unfavorable

 

Depreciation

Direct Labor

Direct Materials

Fixed Costs

Indirect Labor

Indirect Materials

Maintenance

Rent

Supervision

Total Costs

Total Fixed Costs

Total Variable Costs

Units

Utilities

Variable Costs

 

 

 

Depreciation

Direct Labor

Direct Materials

Fixed Costs

Indirect Labor

Indirect Materials

Maintenance

Rent

Supervision

Total Costs

Total Fixed Costs

Total Variable Costs

Units

Utilities

Variable Costs

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

$

$

$

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

 

Depreciation

Direct Labor

Direct Materials

Fixed Costs

Indirect Labor

Indirect Materials

Maintenance

Rent

Supervision

Total Costs

Total Fixed Costs

Total Variable Costs

Units

Utilities

Variable Costs

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

    

Depreciation    

Direct Labor    

Direct Materials    

Fixed Costs    

Indirect Labor    

Indirect Materials    

Maintenance    

Rent    

Supervision    

Total Costs    

Total Fixed Costs    

Total Variable Costs    

Units    

Utilities    

Variable Costs    

 

 

 

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

 

Depreciation

Direct Labor

Direct Materials

Fixed Costs

Indirect Labor

Indirect Materials

Maintenance

Rent

Supervision

Total Costs

Total Fixed Costs

Total Variable Costs

Units

Utilities

Variable Costs

$

$

$

 

Favorable

Unfavorable

Neither Favorable nor Unfavorable

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