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	$683,000
Utilities	40,000
Depreciation	66,000
Total	$789,000

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	$744,000		66,000
February	709,000		60,000
March	676,000		54,000

The Machining Department supervisor has been very pleased with this performance because actual expenditures for JanuaryMarch have been significantly less than the monthly static budget of 789,000. 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	$19
Utility cost per direct labor hour	$1.1
Direct labor hours per unit	0.5
Planned monthly unit production	72,000

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 March 66,000 60,000 54,000 Units of production Wages Utilities Depreciation Total Supporting calculations: Units of production Hours per unit Total hours of production Wages per hour 66,000 60,000 54,000 Total wages Total hours of production Utility costs per hour Total utilities