Question
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
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 | $259,000 |
Utilities | 14,000 |
Depreciation | 24,000 |
Total | $297,000 |
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 | $280,000 | 54,000 | ||
February | 266,000 | 49,000 | ||
March | 253,000 | 44,000 |
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 $297,000. 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 | $1.20 |
Direct labor hours per unit | 0.20 |
Planned monthly unit production | 59,000 |
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. Enter all amounts as positive numbers. If required, use per unit amounts carried out to two decimal places.
January | February | March | |
Units of production | fill in the blank 0db23df8afa706c_1 | fill in the blank 0db23df8afa706c_2 | fill in the blank 0db23df8afa706c_3 |
Wages | $fill in the blank 0db23df8afa706c_4 | $fill in the blank 0db23df8afa706c_5 | $fill in the blank 0db23df8afa706c_6 |
Utilities | fill in the blank 0db23df8afa706c_7 | fill in the blank 0db23df8afa706c_8 | fill in the blank 0db23df8afa706c_9 |
Depreciation | fill in the blank 0db23df8afa706c_10 | fill in the blank 0db23df8afa706c_11 | fill in the blank 0db23df8afa706c_12 |
Total | $fill in the blank 0db23df8afa706c_13 | $fill in the blank 0db23df8afa706c_14 | $fill in the blank 0db23df8afa706c_15 |
Question Content Area
b. Compare the flexible budget with the actual expenditures for the first three months.
January | February | March | |
Total flexible budget | $fill in the blank df7c8efda05a026_1 | $fill in the blank df7c8efda05a026_2 | $fill in the blank df7c8efda05a026_3 |
Actual cost | fill in the blank df7c8efda05a026_4 | fill in the blank df7c8efda05a026_5 | fill in the blank df7c8efda05a026_6 |
Excess of actual cost over budget | $fill in the blank df7c8efda05a026_7 | $fill in the blank df7c8efda05a026_8 | $fill in the blank df7c8efda05a026_9 |
What does this comparison suggest?
The Machining Department has performed better than originally thought. | YesNo |
The department is spending more than would be expected. |
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