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 Utilities Depreciation Total $852,000 65,000 108,000 $1,025,000 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 February $969,000 919,000 March 882,000 92,000 83,000 75,000 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 1,025,000. 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 Utility cost per direct labor hour Direct labor hours per unit $1.3 0.5 Planned monthly unit production 100,000 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 Units of production Wages Utilities Depreciation Total Supporting calculations: Units of production Hours per unit Total hours of production Wages per hour Total wages Total hours of production January 92,000 February March 83,000 75,000 92,000 83,000 75,000 x $ x $ x $ Utility costs per hour X $ x $ x $ Total utilities b. Compare the flexible budget with the actual expenditures for the first three months. Total flexible budget Actual cost Excess of actual cost over budget What does this comparison suggest? January February The Machining Department has performed better than originally thought. No The department is spending more than would be expected. Yes March