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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 Total variable Fixed costs Rent Supervision Depreciation Total fixed $53,760 $52,760 $1,000 Favorable 62,720 59,620 3,100 Favorable 25,600 25,800 200 Unfavorable 20,480 20,020 460 Favorable 22,400 22,280 120 Favorable 12,800 13,180 380 Unfavorable 197,760 193,660 4,100 Favorable 10,800 10,800 -0- Neither Favorable nor Unfavorable 17,600 17,600 -0- Neither Favorable nor Unfavorable 5,700 5,700 -0- Neither Favorable nor Unfavorable 34,100 34,100 -0- Neither Favorable nor Unfavorable $231,860 $227,760 $4,100 Favorable Total costs 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 produced. (a) State the total monthly budgeted cost formula. (Round cost per unit to 2 decimal places, e.g. 1.25.) The formula is = 5 + 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, 2017 Difference Favorable Unfavorable Neither Favorable nor Unfavorable Budget Actual Costs In September, 68,000 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, 2017 Difference Favorable Unfavorable Neither Favorable nor Unfavorable Budget Actual Costs Question Attempts: 0 of 1 used

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