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 $495,000 43,000 72,000 $610,000 Wages Utilities Total 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 $576,000 551,000 528,000 121,000 110,000 99,000 January February March The Machining Department supervisor has been very pleased with this performance because actual expenditures for January-March have been significantly less than the monthly static budget of 610,000. 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 Utility cost per direct labor hour Direct labor hours per unit Planned monthly unit production 132,000 $15 $1.3 0.25 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 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 February 121,000 110,000 March 99,000 January Units of production Wages Utilities Depreciation Total Supporting calculations: Units of production Hours per unit Total hours of production 121,000 110,000 99,000 Wages per hour xs( Ox Total wages Total hours of production Utlity costs per hour Total utilities b. Compare the flexible budget with the actual expenditures for the first three months 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 What does this comparison suggest? The department is spending more than would be expected