Scenario: Good Woods Inc. is a manufacturer of cabinetry products. The company uses a flexible budget for manufacturing overhead based on direct labor hours. For 2019, the master overhead budget for the Assembly Department based on 300,000 direct labor hours was as follows:

Variable Costs:

Indirect Labor $362,000

Materials $148,000

Maintenance $210,000

Utilities $120,000

Fixed Costs:

Supervision $60,000

Depreciation $22,000

Property Taxes $18,000

Insurance $13,000

During August, 24,000 direct labor hours were worked. The company incurred the following variable costs in August: indirect labor $30,200; materials $12,000; maintenance $17,000 and; utilities $9,500. Actual fixed overhead costs were the same as the monthly budgeted fixed costs.

You have been tasked with preparing a flexible budget and assessing the Assembly Departments supervisor performance. Please respond each question below:

1. Prepare a flexible budget for the Assembly Department for the month of August.
2. Identify the difference between budgeted and actual costs as favorable or unfavorable.
3. Did the supervisor do a good, average or poor job in controlling expenses? Explain your rationale.
4. Would you recommend that the Assembly Department uses a static budget instead? Why or why not?
5. What type of responsibility center do you believe that the Assembly Department is? Explain your rationale.