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	$273,000
Utilities	16,000
Depreciation	27,000
Total	$316,000

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	$298,000		57,000
February	285,000		52,000
March	273,000		47,000

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 $316,000. 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	$22.00
Utility cost per direct labor hour	$1.30
Direct labor hours per unit	0.20
Planned monthly unit production	63,000

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. Enter all amounts as positive numbers. If required, use per unit amounts carried out to two decimal places.

Niland Company-Machining Department
Flexible Production Budget
For the Three Months Ending March 31
	January	February	March
Units of production	_____	____	____
Wages	$_____	$_____	$_____
Utilities	_____	______	_____
Depreciation	______	______	______
Total	$_____	$_____	$_____

b. Compare the flexible budget with the actual expenditures for the first three months.

	January	February	March
Total flexible budget	$_______	$_______	$_______
Actual cost	________	_________	_______
Excess of actual cost over budget	$______	$_________	$_______