Hagerstown Company Machining Department Monthly Production Budget
Wages	$493,000
Utilities	31,000
Depreciation	52,000
Total	$576,000

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
May	$543,000		113,000
June	519,000		103,000
July	496,000		93,000

The Machining Department supervisor has been very pleased with this performance because actual expenditures for MayJuly have been significantly less than the monthly static budget of 576,000. 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	$16.00
Utility cost per direct labor hour	$1.00
Direct labor hours per unit	0.25
Planned monthly unit production	124,000

a. Prepare a flexible budget for the actual units produced for May, June, and July in the Machining Department. Assume depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places.

Machining Department Budget For the Three Months Ending July 31 May June Units of production 113,000 103,000 July 93,000 Total 113,000 103,000 93,000 x X Supporting calculations: Units of production Hours per unit Total hours of production Wages per hour X $ Total wages $ Total hours of production Utility costs per hour X $ X $ XS Total utilities b. Compare the flexible budget with the actual expenditures for the first three months. May June July Total flexible budget Actual cost Excess of actual cost over budget What does this comparison suggest? The Machining Department has performed better than originally thought. The department is spending more than would be expected