Question

*Problem 14-3A (Part Level Submission) Sarasota Company uses budgets in controlling costs. The August 2017 budget report for the company's Assembling Department is as follows. SARASOTA 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 $53,680 59,780 29,280 19,520 15,250 12,200 189,710 $52,580 56,480 29,380 19,060 15,140 12,530 185,170 $1,100 Favorable 3,300 Favorable 100 Unfavorable 460 Favorable 110 Favorable 330 Unfavorable 4,540 Favorable Maintenance Total variable Fixed costs Rent Supervision Depreciation 11,700 18,500 7,300 37,500 $227,210 11,700 18,500 7,300 37,500 $222,670 -0- -0- -O- -0- $4,540 Favorable Total fixed Total costs 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. *(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. In September, 65,000 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.)

Answer 1

Solution a:

Budgeted Variable cost per unit = total variable cost / budgeted units = $189710/61000 = $3.11 per unit

The formula is $37500 + variable cost of $3.11 per unit.

Solution 2:

Sarasota Company Assembling Department Flexible budget report For the month ended September 31, 2017 Flexible budet Particulars Budget Actual cost Difference Favorable / Unfavorable / Neither favorable nor unfavorable Units of Production 65000 65000 11 Variable overhead costs: (cost/61000*65000) Direct materials Direct Labor Indirect Materials Indirect labor Utilities Maintenance Total Variable Fixed costs: Rent Supervision Depreciation Total Fixed $57,200.00 $63,700.00 $31,200.00 $20,800.00 $16,250.00 $13,000.00 $202,150.00 $57,838.00 $62,128.00 $32,318.00 $20,966.00 $16,654.00 $13,783.00 $203,687.00 $638.00 Unfavorable $1,572.00 Favorable $1,118.00 Unfavorable $166.00 Unfavorable $404.00 Unfavorable $783.00 Unfavorable $1,537.00 Unfavorable 20 $11,700.00 $18,500.00 $7,300.00 $37,500.00 $11,700.00 $18,500.00 $7,300.00 $37,500.00 $0.00 Neither Favorable nor Unfavorable $0.00 Neither Favorable nor Unfavorable $0.00 Neither Favorable nor Unfavorable $0.00 Neither Favorable nor Unfavorable 25 26 27 Total Costs $239,650.00 $241,187.00 $1,537.00 Unfavorable et664 Sheet608 (3) Sheet194 (8) Sheet27 (2) Sheet314 (4) Sheet674 Sheet685 Sheet686