Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland ny agreed to the following monthly static budget for the upcoming year: Niland Company Machining Department Monthly Production Budget Wages $677,000 Utilities 37,000 Depreciation 62,000 Total $776,000 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 $732,000 113,000 February 699,000 103,000 March 668,000 93,000 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 776,000. 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 the Machining Department. Additional budget information for the Machining Department is $22 $1.2 Wages per hour Utility cost per direct labor hour Direct labor hours per unit Planned monthly unit production 0.25 124,000 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 January February March Units of production 113,000 103,000 93,000 Wages Utilities Depreciation $ Total Supporting calculations: Units of production Hours per unit 113,000 103,000 93,000 Total hours of production Wages per hour X $ X $ X $ March January 113,000 February 103,000 Units of production 93,000 Wages EA Utilities Depreciation Total TA Supporting calculations: Units of production 113,000 103,000 93,000 Hours per unit oiddinoini Diodata Total hours of production Wages per hour X $ Total wages $ Total hours of production Utility costs per hour X $ X $ Total utilities $ TA b. Compare the flexible budget with the actual expenditures for the first three months. January February March 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