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 Wages $315,000 Utilities 20,000 Depreciation 34,000 Total $369,000 The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows: May Amount Spent Units Produced $349,000 $5,000 June 335,000 78,000 July 319,000 70,000 The Machining Department supervisor has been very pleased with this performance because actual expenditures for May- July have been significantly less than the monthly static budget of 369,000. 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 $17.00 Utility cost per direct labor hour $1.10 Print Item eBook Show Me How Jelity cost per direct labor hour $1.10 Direct labor hours per unit 0.20 Planned monthly unit production 93,000 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 May June July Units of production 85,000 78,000 70,000 Wages Utilities Depreciation Total Supporting calculations: Units of production Hours per unit 85,000 78,000 70,000 X X Total hours of production Wages per hour Total wages Total hours of production XS X $ Utility costs per hour Hours per unit Total hours of production Wages per hour X $ X $ $ Total wages Total hours of production Utility costs per hour X $ Total utilities July b. Compare the flexible budget with the actual expenditures for the first three months. May June 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. No The department is spending more than would be expected. Yes Sales and Production Budgets Sonic Inc. manufactures two models of speakers, Rumble and Thunder. Based on the following production and sales data for June, prepare (a) a sales budget and (b) a production budget: Rumble Thunder 245 67 282 58 Estimated Inventory (units), June 1 Desired inventory (units), June 30 Expected sales volume (units): Midwest Region South Region Unit sales price 3,000 3,350 5,050 4,400 $135 $220 a. Prepare a sales budget. Sonic Inc. Sales Budget For the Month Ending June 30 Product and Area Unit Sales Volume Unit Selling Price Model: Rumble Midwest Region South Region Total Sales Total O no Model: Thunder Midwest Region Direct Materials Purchases Budget Coca-Cola Enterprises (CCE) is the largest bottler of Coca-Cola in Western Europe. The company purchases Coke and Sprite concentrate from The Coca-Cola Company (KO), dilutes and mixes the concentrate with carbonated water, and then fills the blended beverage into cans or plastic two-liter bottles. Assume that the estimated production for Coke and Sprite two-liter bottles at the Wakefield, UK, bottling plant is as follows for the month of May: Coke 153,000 two-liter bottles Sprite 86,500 two-liter bottles In addition, assume that the concentrate costs $75 per pound for both Coke and Sprite and is used at a rate of 0.15 pound per 100 liters of carbonated water in blending Coke and 0.10 pound per 100 liters of carbonated water in blending Sprite. Assume that two liters of carbonated water are used for each two-liter bottle of finished product. Assume further that two-liter bottles cost $0.08 per bottle and carbonated water costs $0.06 per liter. Prepare a direct materials purchases budget for May, assuming inventories are ignored, because there are no changes between beginning and ending inventories for concentrate, bottles, and carbonated water. Coca-Cola Enterprises-Wakefield Plant Direct Materials Purchases Budget For the Month Ending May 31 (assumed data) Concentrate 2-Liter Bottles Carbonated Water Materials required for production: lbs. btls. Itrs. Coke Sprite Total materials lbs. btis Itrs. Direct materials unit price X X $ X $ Total direct materials to be purchased Direct Materials Purchases Budget Anticipated sales for Safety Grip Company were 69,000 passenger car tires and 21,000 truck tires. Rubber and steel belts are used in producing passenger car and truck tires as follows: Passenger Car Truck Rubber 29 lbs. per unit 68 lbs. per unit Steel belts 7 lbs. per unit 18 lbs. per unit The purchase prices of rubber and steel are $3.10 and $4.10 per pound, respectively. The desired ending inventories of rubber and steel belts are 65,000 and 14,000 pounds, respectively. The estimated beginning inventories for rubber and steel belts are 76,000 and 11,000 pounds, respectively, Prepare a direct materials purchases budget for Safety Grip Company for the year ended December 31, 2019. Safety Grip Company Direct Materials Purchases Budget For the Year Ending December 31, 2019 Rubber Steel Belts Pounds required for production: Passenger tires 76,000 lbs. Truck tires Desired inventory, December 31, 2049 65,000 Total Ibs S 14,000 lbs. Ibs. Total pounds available Estimated Inventory, January 1, 2019 Total units purchased Ibs. lbs. Unit price X $ x $ Total direct materials to be purchased