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eBook Show Me How Question Content Area Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed to the
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Question Content Area
Static Budget versus Flexible Budget
The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year:
Niland Company Machining Department Monthly Production Budget | |
Wages | $1,125,000 |
Utilities | 90,000 |
Depreciation | 50,000 |
Total | $1,265,000 |
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 | $1,100,000 | 80,000 | ||
February | 1,200,000 | 90,000 | ||
March | 1,250,000 | 95,000 |
The Machining Department supervisor has been very pleased with this performance because actual expenditures for JanuaryMarch have been significantly less than the monthly static budget of $1,265,000. 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 | $15.00 |
Utility cost per direct labor hour | $1.20 |
Direct labor hours per unit | 0.75 |
Planned monthly unit production | 100,000 |
Question Content Area
a. Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places.
January | February | March | |
Units of production | 80,000 | 90,000 | 95,000 |
AdvertisingRentResearch and developmentSuppliesWages | $- Select - | $- Select - | $- Select - |
AdvertisingRentResearch and developmentSuppliesUtilities | - Select - | - Select - | - Select - |
AdvertisingDepreciationRentResearch and developmentSupplies | - Select - | - Select - | - Select - |
Total | $fill in the blank f83193f7304b07b_13 | $fill in the blank f83193f7304b07b_14 | $fill in the blank f83193f7304b07b_15 |
Supporting calculations: | |||
Units of production | 80,000 | 90,000 | 95,000 |
Hours per unit | xfill in the blank f83193f7304b07b_16 | xfill in the blank f83193f7304b07b_17 | xfill in the blank f83193f7304b07b_18 |
Total hours of production | fill in the blank f83193f7304b07b_19 | fill in the blank f83193f7304b07b_20 | fill in the blank f83193f7304b07b_21 |
Wages per hour | x $fill in the blank f83193f7304b07b_22 | x $fill in the blank f83193f7304b07b_23 | x $fill in the blank f83193f7304b07b_24 |
Total wages | $fill in the blank f83193f7304b07b_25 | $fill in the blank f83193f7304b07b_26 | $fill in the blank f83193f7304b07b_27 |
Total hours of production | fill in the blank f83193f7304b07b_28 | fill in the blank f83193f7304b07b_29 | fill in the blank f83193f7304b07b_30 |
Utility costs per hour | x $fill in the blank f83193f7304b07b_31 | x $fill in the blank f83193f7304b07b_32 | x $fill in the blank f83193f7304b07b_33 |
Total utilities | $fill in the blank f83193f7304b07b_34 | $fill in the blank f83193f7304b07b_35 | $fill in the blank f83193f7304b07b_36 |
Question Content Area
b. Compare the flexible budget with the actual expenditures for the first three months.
January | February | March | |||
Total flexible budget | $fill in the blank 362315064fcafc6_1 | $fill in the blank 362315064fcafc6_2 | $fill in the blank 362315064fcafc6_3 | ||
Actual cost | fill in the blank 362315064fcafc6_4 | fill in the blank 362315064fcafc6_5 | fill in the blank 362315064fcafc6_6 | ||
Excess of actual cost over budget | $fill in the blank 362315064fcafc6_7 | $fill in the blank 362315064fcafc6_8 | $fill in the blank 362315064fcafc6_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. |
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