he production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static budget for the upcoming year:

Hagerstown Company

Machining Department

Monthly Production Budget

Line Item Description Amount

Wages $$481,000$

Utilities $27,000$

Depreciation $44,000$

Total $$552,000$

The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows:

Month Amount Spent Units Produced

May $$520,00049,000$

June $490,00044,000$

July $471,00040,000$

The Machining Department supervisor has been very pleased with this performance because actual expenditures for May$$July have been significantly less than the monthly static budget of $552,000.$ However, the plant manager believes that the budget should not remain fixed for every month but should $$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:

Line Item Description Amount

Wages per hour $$18\mathrm{.}00$

Utility cost per direct labor hour $$1\mathrm{.}00$

Direct labor hours per unit $0\mathrm{.}50$

Planned monthly unit production $53,000$

Question Content Area

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.