al or D) TE EX 22-3 Static budget versus flexible budget Obj. 2, 4. The production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static budget for the upcoming year: Wages.. Utilities. Hagerstown Company Machining Department Monthly Production Budget $2,250,000 72,000 36,000 Depreciation.. Total $2,358,000 The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows: May June July Amount Spent Units Produced $1,600,000 1,950,000 2,200,000 40,000 48,000 52,000 The Machining Department supervisor has been very pleased with this performance because actual expenditures for May-July have been significantly less than the monthly static budget of $2,358,000. However, the plant manager believes that the budget should not remain fixed for (Continued) 1132 Chapter 22 Budgeting. every month but should "flex" or adjust to the volume of work that is produced in the b Department. Additional budget information for the Machining Department is as follows: Wages per hour Utility cost per direct labor hour Direct labor hours per unit Planned monthly unit production $25.00 $0.80 1.5 60,000 Machining a. Prepare a flexible budget for the actual units produced for May, June, and July in the Machining b. Department. Assume depreciation is a fixed cost. Compare the flexible budget with the actual expenditures for the first three months What does this comparison suggest