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Static budget versus flexible budget The production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static budget for the upcoming
Static budget versus flexible budget The production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static budget for the upcoming year: Hagerstown Company Machining Department Monthly Production Budget Line Item Description Amount Wages $ Utilities Depreciation Total $ The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows: Month Amount Spent Units Produced May $ June July The Machining Department supervisor has been very pleased with this performance because actual expenditures for MayJuly have been significantly less than the monthly static budget of 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: Line Item Description Amount Wages per hour $ Utility cost per direct labor hour $ Direct labor hours per unit Planned monthly unit production Hagerstown Company b Compare the flexible budget with the actual expenditures for the first three months. What does this comparison suggest? The Machining Department has performed better than originally thought. The department is spending more than would be expected.
Static budget versus flexible budget
The production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static budget for the upcoming year:
Hagerstown Company
Machining Department
Monthly Production Budget
Line Item Description Amount
Wages $
Utilities
Depreciation
Total $
The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows:
Month Amount Spent Units Produced
May $
June
July
The Machining Department supervisor has been very pleased with this performance because actual expenditures for MayJuly have been significantly less than the monthly static budget of 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:
Line Item Description Amount
Wages per hour $
Utility cost per direct labor hour $
Direct labor hours per unit
Planned monthly unit production Hagerstown Company
b Compare the flexible budget with the actual expenditures for the first three months.
What does this comparison suggest?
The Machining Department has performed better than originally thought.
The department is spending more than would be expected.
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