Question

Novak Company uses budgets in controlling costs. The August 2017 budget report for the company's Assembling Department is as follows. NOVAK COMPANY Budget Report Assembling Department For the Month Ended August 31, 2017 Difference Budget Actual Favorable Unfavorable Manufacturing Costs Variable costs Direct materials Direct labor Indirect materials Indirect labor Utilities $55,900 59,800 26,000 19,500 16,250 9,100 186,550 $54,900 56,500 26,100 19,080 16,090 9,200 181,870 $1,000 Favorable 3,300 Favorable 100 Unfavorable 420 Favorable 160 Favorable 100 Unfavorable 4,680 Favorable Maintenance Total variable Fixed costs Rent -O- Supervision -0- Depreciation Total fixed Total costs 11,200 16,500 7,800 35,500 $222,050 11,200 16,500 7,800 35,500 $217,370 -0- $4,680 Favorable The monthly budget amounts in the report were based on an expected production of 65,000 units per month or 780,000 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 63,000 units were produced.

Answer 1

Total Budgeted Variable cost Budgeted Units $1,86,550.00 65000 units (b) = Variable cost per unit (a/b) $ 2.87 per unit Budgeted Fixed Cost (per month) $ 35,500.00 Total Monthly budgeted cost formula Fixed Cost Add: Variable Costs $ 35,500.00 $2.87 per unit x 65000 unit Formula: $35,500.00 + Variable Costs of $ 2.87 per unit

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