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eBook Show Me How Print Item Question Content Area Static Budget versus Flexible Budget The production supervisor of the Machining Department for Celtic Company agreed
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Static Budget versus Flexible Budget
The production supervisor of the Machining Department for Celtic Company agreed to the following monthly static budget for the upcoming year:
| Celtic Company Machining Department Monthly Production Budget | |
| Wages | $456,000 |
| Utilities | 24,000 |
| Depreciation | 40,000 |
| Total | $520,000 |
The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows:
| Amount Spent | Units Produced | |||
| January | $490,000 | 110,000 | ||
| February | 466,000 | 100,000 | ||
| March | 444,000 | 90,000 | ||
The Machining Department supervisor has been very pleased with this performance because actual expenditures for JanuaryMarch have been less than the monthly static budget of $520,000. However, the plant manager believes that the budget should not remain fixed for every month but should flex or adjust to the volume of work that is produced in the Machining Department. Additional budget information for the Machining Department is as follows:
| Wages per hour | $19.00 |
| Utility cost per direct labor hour | $1.00 |
| Direct labor hours per unit | 0.20 |
| Planned monthly unit production | 120,000 |
Question Content Area
a. Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume that depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places.
Celtic Company-Machining Department Flexible Production Budget For the Three Months Ending March 31
| January | February | March | |
| Units of production | fill in the blank 01823bfee03b018_1 | fill in the blank 01823bfee03b018_2 | fill in the blank 01823bfee03b018_3 |
| Wages | $fill in the blank 01823bfee03b018_4 | $fill in the blank 01823bfee03b018_5 | $fill in the blank 01823bfee03b018_6 |
| Utilities | fill in the blank 01823bfee03b018_7 | fill in the blank 01823bfee03b018_8 | fill in the blank 01823bfee03b018_9 |
| Depreciation | fill in the blank 01823bfee03b018_10 | fill in the blank 01823bfee03b018_11 | fill in the blank 01823bfee03b018_12 |
| Total |
b. Compare the flexible budget with the actual expenditures for the first three months.
| January | February | March | |
| Actual cost | $fill in the blank 91387003602d02c_1 | $fill in the blank 91387003602d02c_2 | $fill in the blank 91387003602d02c_3 |
| Total flexible budget | fill in the blank 91387003602d02c_4 | fill in the blank 91387003602d02c_5 | fill in the blank 91387003602d02c_6 |
| Excess of actual cost over budget | $fill in the blank 91387003602d02c_7 | $fill in the blank 91387003602d02c_8 | $fill in the blank 91387003602d02c_9 |
What does this comparison suggest?
| The Machining Department has performed better than originally thought. | YesNo |
| The department is spending more than would be expected. | YesNo |
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