Static Budget versus Flexible Budget

The production supervisor of the Machining Department for Celtic Company agreed to the following monthly static budget for the upcoming year:

Celtic 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:

work that is produced in the Machining Department. Additional budget information for the Machining Department is as follows:

Wages per hour

$$19\mathrm{.}00$

Utility cost per direct labor hour

$$0\mathrm{.}90$

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

Planned monthly unit production $100,000$

required, use per unit amounts carried out to two decimal places.

Celtic Company$-$Machining Department

Flexible Production Budget

For the Three Months Ending March $31$

b$.$ Compare the flexible budget with the actual expenditures for the first three months.

Actual cost

Total flexible budget

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.