Static Budget versus Flexible Budget The production supervisor of the Machining Department for Hagerstown Company agreed to the following month Hagerstown Company Machining Department Monthly Production Budget Wages $217,000 Utilities 15,000 Depreciation 26,000 Total $258,000 The actual amount spent and the actual units produced in the first three months in the Machining Department were Amount Spent Units Produced May $244,000 71,000 June 231,000 64,000 July 222,000 58,000 The Machining Department supervisor has been very pleased with this performance because actual expenditures for budget of 258,000. However, the plant manager believes that the budget should not remain fixed for every month bu 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 $14.00 $1.00 0.20 77,000 Prerres flavihle hudnet for the actual units nonduced for May June and buy in the Machining Department Assum a. Prepare a flexible budget for the actual units produced for May, June, and July in the Machining Department. Assume depreciation is a fixed amounts carried out to two decimal places. Hagerstown Company Machining Department Budget For the Three Months Ending July 31 May 71.000 Units of production Total Supporting calculations: Units of production 71.000 Hours per unit Total hours of production Wages per hour Total wages Total hours of production Utility costs per hour Total utilities b. Compare the flexible budget with the actual expenditures for the first three months. Total hours of production Utility costs per hour Total utilities b. Compare the flexible budget with the actual expenditures for the first three months. May June July Total flexible budget Actual cost Excess of actual cost over budget What does this comparison suggest? The Machining Department has performed better than originally thought. The department is spending more than would be expected. Check My Work 3 more Check My Work uses remaining