PLEASE ANSWER ALL PARTS OF THE QUESTIONS BELOW
Flexible Budget for Selling and Administrative Expenses for a Service Company Cloud Productivity Inc. uses flexible budgets that are based on the following data: Sales commissions 15% of sales Advertising expense 20% of sales Miscellaneous administrative expense Office salaries expense $5,500 per month plus 12% of sales $29,000 per month $13,000 per month plus 20% of sales Customer support expenses Research and development expense $32,000 per month Prepare a flexible selling and administrative expenses budget for March for sales volumes of $400,000, $500,000, and $600,000. (Use Exhibit 5 as a model.) Cloud Productivity Inc. Flexible Selling and Administrative Expenses Budget For the Month Ending March 31 Total sales $400000 $500000 $600000 Variable cost: Total variable cost $ Fixed cost: $ Total fixed cost Total selling and administrative expenses $ 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 $971,000 Utilities 40,000 Depreciation 66,000 Total $1,077,000 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 February $1,013,000 956,000 912,000 81,000 73,000 66,000 March The Machining Department supervisor has been very pleased with this performance because actual expenditures for January-March have been significantly less than the monthly static budget of 1,077,000. 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 $22 Utility cost per direct labor hour $0.9 Direct labor hours per unit 0.5 Planned monthly unit production 88,000 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. Niland Company Machining Department Budget For the Three Months Ending March 31 January February Units of production 81,000 73,000 March 66,000 $ Total Supporting calculations: Units of production Hours per unit 81,000 73,000 66,000 X Total hours of production Wages per hour X $ X $ X $ Total wages $ VA Total hours of production Utility costs per hour X $ X $ X $ Total utilities $ b. Compare the flexible budget with the actual expenditures for the first three months. January February March Total flexible budget ES 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
