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

The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows:

information for the Machining Department is as follows:

Utility cost per direct labor hour $,$$$1\mathrm{.}20$

Direct labor hours per unit $,0\mathrm{.}20$

Planned monthly unit production $,55,000$

a$.$ Prepare a flexible budget for the actual units produced for May, June, and July in the Machining Department. Assume depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places.

Hagerstown Company

Machining Department Budget

For the Three Months Ending July $31$

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?

The Machining Department has performed better than originally thought.

The department is spending more than would be expected.

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