Hagerstown Company Machining Department Monthly Production Budget Wages Utilities Depreciation Total 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 61,000 56,000 50,000 May June $332,000 22,000 36,000 $390,000 $368,000 354,000 335,000 July 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 390,000. 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 Utility cost per direct labor hour Direct labor hours per unit Planned monthly unit production $20.00 $1.30 0.25 67,000

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 390,000 . However, the plant manager believes that the budget should not remain fixed for every month but should "nex" or adjust to the volume of work that is produced in the Machining Department. Additional budget information for the Machining Department is as follows: 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. b. Compare the flexible budget with the actual expenditures for the first three months. The Machining Department has performed better than originally thought. The department is spending more than would be expected