Park University - AC 202Week 6 Exercise 22-3A. Contains Solutions and Calculations.

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Hill Company uses budgets in controlling costs. The August 2014 budget report for the company’s Assembling Department is as follows. The monthly budget amounts in the report were based on an expect... ed 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. Note that the per unit variable costs are computed by taking the budget amount at 64,000 units and dividing it by 64,000. For example, direct materials per unit is therefore $0.82 or ($52,480/$64,000). (c) 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.) The manager’s performance was slightly better in September than it was in August. However, each variable cost was slightly over budget again except for direct labor. Note that actual variable costs in September were 10% higher than the actual variable costs in August. Therefore to find the actual variable costs in September, the actual variable costs in August must be increased 10% as follows: [Show More]

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