Question
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Celtic Company agreed to the following monthly static budget for the upcoming
Static Budget versus Flexible Budget
The production supervisor of the Machining Department for Celtic Company agreed to the following monthly static budget for the upcoming year:
Celtic Company Machining Department Monthly Production Budget | |
Wages | $778,000 |
Utilities | 46,000 |
Depreciation | 77,000 |
Total | $901,000 |
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 | $850,000 | 84,000 | ||
February | 816,000 | 77,000 | ||
March | 775,000 | 69,000 |
The Machining Department supervisor has been very pleased with this performance because actual expenditures for JanuaryMarch have been less than the monthly static budget of $901,000. 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 | $17.00 |
Utility cost per direct labor hour | $1.00 |
Direct labor hours per unit | 0.50 |
Planned monthly unit production | 92,000 |
a. Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume that depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places.
Celtic Company-Machining Department | |||
Flexible Production Budget | |||
For the Three Months Ending March 31 | |||
January | February | March | |
Units of production | fill in the blank 86018f0c102106a_1 | fill in the blank 86018f0c102106a_2 | fill in the blank 86018f0c102106a_3 |
Wages | $fill in the blank 86018f0c102106a_4 | $fill in the blank 86018f0c102106a_5 | $fill in the blank 86018f0c102106a_6 |
Utilities | fill in the blank 86018f0c102106a_7 | fill in the blank 86018f0c102106a_8 | fill in the blank 86018f0c102106a_9 |
Depreciation | fill in the blank 86018f0c102106a_10 | fill in the blank 86018f0c102106a_11 | fill in the blank 86018f0c102106a_12 |
Total | $fill in the blank 86018f0c102106a_13 | $fill in the blank 86018f0c102106a_14 | $fill in the blank 86018f0c102106a_15 |
b. Compare the flexible budget with the actual expenditures for the first three months.
January | February | March | |
Actual cost | $fill in the blank 1b90d4feaffbffc_1 | $fill in the blank 1b90d4feaffbffc_2 | $fill in the blank 1b90d4feaffbffc_3 |
Total flexible budget | fill in the blank 1b90d4feaffbffc_4 | fill in the blank 1b90d4feaffbffc_5 | fill in the blank 1b90d4feaffbffc_6 |
Excess of actual cost over budget | $fill in the blank 1b90d4feaffbffc_7 | $fill in the blank 1b90d4feaffbffc_8 | $fill in the blank 1b90d4feaffbffc_9 |
What does this comparison suggest?
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