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 $$519,000$

Utilities $40,000$

Depreciation $66,000$

Total $$625,000$

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 $$590,000112,000$

February $565,000102,000$

March $540,00092,000$

The Machining Department supervisor has been very pleased with this performance because actual expenditures for January$$March have been less than the monthly static budget of $$625,000.$ 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\mathrm{.}00$

Utility cost per direct labor hour $$1\mathrm{.}30$

Direct labor hours per unit $0\mathrm{.}25$

Planned monthly unit production $122,000$

Question Content Area

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 $2$a$42$b$8$fe$3$fd$401$d$\_1$

fill in the blank $2$a$42$b$8$fe$3$fd$401$d$\_2$

fill in the blank $2$a$42$b$8$fe$3$fd$401$d$\_3$

Wages $fill in the blank $2$a$42$b$8$fe$3$fd$401$d$\_4$

$fill in the blank $2$a$42$b$8$fe$3$fd$401$d$\_5$

$fill in the blank $2$a$42$b$8$fe$3$fd$401$d$\_6$

Utilities fill in the blank $2$a$42$b$8$fe$3$fd$401$d$\_7$

fill in the blank $2$a$42$b$8$fe$3$fd$401$d$\_8$

fill in the blank $2$a$42$b$8$fe$3$fd$401$d$\_9$

Depreciation fill in the blank $2$a$42$b$8$fe$3$fd$401$d$\_10$

fill in the blank $2$a$42$b$8$fe$3$fd$401$d$\_11$

fill in the blank $2$a$42$b$8$fe$3$fd$401$d$\_12$

Total $fill in the blank $2$a$42$b$8$fe$3$fd$401$d$\_13$

$fill in the blank $2$a$42$b$8$fe$3$fd$401$d$\_14$

$fill in the blank $2$a$42$b$8$fe$3$fd$401$d$\_15$

Question Content Area

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

January February March

Actual cost $fill in the blank $07$b$1$cbfd$704$ffb$3\_1$

$fill in the blank $07$b$1$cbfd$704$ffb$3\_2$

$fill in the blank $07$b$1$cbfd$704$ffb$3\_3$

Total flexible budget fill in the blank $07$b$1$cbfd$704$ffb$3\_4$

fill in the blank $07$b$1$cbfd$704$ffb$3\_5$

fill in the blank $07$b$1$cbfd$704$ffb$3\_6$

Excess of actual cost over budget $fill in the blank $07$b$1$cbfd$704$ffb$3\_7$

$fill in the blank $07$b$1$cbfd$704$ffb$3\_8$

$fill in the blank $07$b$1$cbfd$704$ffb$3\_9$

What does this comparison suggest?

The Machining Department has performed better than originally thought.

The department is spending more than would be expected.