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	$1,199,000
Utilities	71,000
Depreciation	118,000
Total	$1,388,000

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
May	$1,309,000		100,000
June	1,249,000		91,000
July	1,191,000		82,000

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 1,388,000. 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	$22.00
Utility cost per direct labor hour	$1.30
Direct labor hours per unit	0.50
Planned monthly unit production	109,000

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	100,000	91,000	82,000
	$fill in the blank 445eb6f8804bfa7_2	$fill in the blank 445eb6f8804bfa7_3	$fill in the blank 445eb6f8804bfa7_4
	fill in the blank 445eb6f8804bfa7_6	fill in the blank 445eb6f8804bfa7_7	fill in the blank 445eb6f8804bfa7_8
	fill in the blank 445eb6f8804bfa7_10	fill in the blank 445eb6f8804bfa7_11	fill in the blank 445eb6f8804bfa7_12
Total	$fill in the blank 445eb6f8804bfa7_13	$fill in the blank 445eb6f8804bfa7_14	$fill in the blank 445eb6f8804bfa7_15
Supporting calculations:
Units of production	100,000	91,000	82,000
Hours per unit	x fill in the blank 445eb6f8804bfa7_16	x fill in the blank 445eb6f8804bfa7_17	x fill in the blank 445eb6f8804bfa7_18
Total hours of production	fill in the blank 445eb6f8804bfa7_19	fill in the blank 445eb6f8804bfa7_20	fill in the blank 445eb6f8804bfa7_21
Wages per hour	x $fill in the blank 445eb6f8804bfa7_22	x $fill in the blank 445eb6f8804bfa7_23	x $fill in the blank 445eb6f8804bfa7_24
Total wages	$fill in the blank 445eb6f8804bfa7_25	$fill in the blank 445eb6f8804bfa7_26	$fill in the blank 445eb6f8804bfa7_27
Total hours of production	fill in the blank 445eb6f8804bfa7_28	fill in the blank 445eb6f8804bfa7_29	fill in the blank 445eb6f8804bfa7_30
Utility costs per hour	x $fill in the blank 445eb6f8804bfa7_31	x $fill in the blank 445eb6f8804bfa7_32	x $fill in the blank 445eb6f8804bfa7_33
Total utilities	$fill in the blank 445eb6f8804bfa7_34	$fill in the blank 445eb6f8804bfa7_35	$fill in the blank 445eb6f8804bfa7_36

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

	May	June	July
Total flexible budget	$fill in the blank 1276e0f11025fba_1	$fill in the blank 1276e0f11025fba_2	$fill in the blank 1276e0f11025fba_3
Actual cost	fill in the blank 1276e0f11025fba_4	fill in the blank 1276e0f11025fba_5	fill in the blank 1276e0f11025fba_6
Excess of actual cost over budget	$fill in the blank 1276e0f11025fba_7	$fill in the blank 1276e0f11025fba_8	$fill in the blank 1276e0f11025fba_9

What does this comparison suggest?

The Machining Department has performed better than originally thought.
The department is spending more than would be expected.

--------------------

Forecast Sales Volume and Sales Budget

For 20Y8, Raphael Frame Company prepared the sales budget that follows.

At the end of December 20Y8, the following unit sales data were reported for the year:

	Unit Sales
	8" 10" Frame		12" 16" Frame
East	8,755		3,686
Central	6,510		3,090
West	12,348		5,616

Raphael Frame Company Sales Budget For the Year Ending December 31, 20Y8
Product and Area		Unit Sales Volume		Unit Selling Price		Total Sales
8" 10" Frame:
East		8,500		$16		$136,000
Central		6,200		16		99,200
West		12,600		16		201,600
Total		27,300				$436,800
12" 16" Frame:
East		3,800		$30		$114,000
Central		3,000		30		90,000
West		5,400		30		162,000
Total		12,200				$366,000
Total revenue from sales						$802,800

For the year ending December 31, 20Y9, unit sales are expected to follow the patterns established during the year ending December 31, 20Y8. The unit selling price for the 8" 10" frame is expected to increase to $17 and the unit selling price for the 12" 16" frame is expected to increase to $32, effective January 1, 20Y9.

Required:

1. Compute the increase or decrease of actual unit sales for the year ended December 31, 20Y8, over budget.

Enter any decreases beginning with a minus (-) sign.

		Unit Sales, Year Ended 20Y8				Increase (Decrease) Actual Over Budget
		Budget		Actual Sales		Amount	Percent
8" 10" Frame:
	East	fill in the blank 640fc005b07c052_1		fill in the blank 640fc005b07c052_2		fill in the blank 640fc005b07c052_3	fill in the blank 640fc005b07c052_4 %
	Central	fill in the blank 640fc005b07c052_5		fill in the blank 640fc005b07c052_6		fill in the blank 640fc005b07c052_7	fill in the blank 640fc005b07c052_8 %
	West	fill in the blank 640fc005b07c052_9		fill in the blank 640fc005b07c052_10		fill in the blank 640fc005b07c052_11	fill in the blank 640fc005b07c052_12 %
12" 16" Frame:
	East	fill in the blank 640fc005b07c052_13		fill in the blank 640fc005b07c052_14		fill in the blank 640fc005b07c052_15	fill in the blank 640fc005b07c052_16 %
	Central	fill in the blank 640fc005b07c052_17		fill in the blank 640fc005b07c052_18		fill in the blank 640fc005b07c052_19	fill in the blank 640fc005b07c052_20 %
	West	fill in the blank 640fc005b07c052_21		fill in the blank 640fc005b07c052_22		fill in the blank 640fc005b07c052_23	fill in the blank 640fc005b07c052_24 %

2. Assuming that the increase or decrease in actual sales to budget indicated in part (1) is to continue in 20Y9, compute the unit sales volume to be used for preparing the sales budget for the year ending December 31, 20Y9.

Enter any decreases beginning with a minus (-) sign. Round budgeted units to the nearest whole unit.

		20Y8 Actual Units		Percentage Increase (Decrease)	20Y9 Budgeted Units (rounded)
8" 10" Frame:
	East	fill in the blank 640fc005b07c052_25		fill in the blank 640fc005b07c052_26 %	fill in the blank 640fc005b07c052_27
	Central	fill in the blank 640fc005b07c052_28		fill in the blank 640fc005b07c052_29 %	fill in the blank 640fc005b07c052_30
	West	fill in the blank 640fc005b07c052_31		fill in the blank 640fc005b07c052_32 %	fill in the blank 640fc005b07c052_33
12" 16" Frame:
	East	fill in the blank 640fc005b07c052_34		fill in the blank 640fc005b07c052_35 %	fill in the blank 640fc005b07c052_36
	Central	fill in the blank 640fc005b07c052_37		fill in the blank 640fc005b07c052_38 %	fill in the blank 640fc005b07c052_39
	West	fill in the blank 640fc005b07c052_40		fill in the blank 640fc005b07c052_41 %	fill in the blank 640fc005b07c052_42

3. Prepare a sales budget for the year ending December 31, 20Y9.

Raphael Frame Company
Sales Budget
For the Year Ending December 31, 20Y9
Product and Area	Unit Sales Volume	Unit Selling Price	Total Sales
8" 10" Frame:
East	fill in the blank 3f5d6e03dfee056_1	$fill in the blank 3f5d6e03dfee056_2	$fill in the blank 3f5d6e03dfee056_3
Central	fill in the blank 3f5d6e03dfee056_4	fill in the blank 3f5d6e03dfee056_5	fill in the blank 3f5d6e03dfee056_6
West	fill in the blank 3f5d6e03dfee056_7	fill in the blank 3f5d6e03dfee056_8	fill in the blank 3f5d6e03dfee056_9
Total	fill in the blank 3f5d6e03dfee056_10		$fill in the blank 3f5d6e03dfee056_11
12" 16" Frame:
East	fill in the blank 3f5d6e03dfee056_12	$fill in the blank 3f5d6e03dfee056_13	$fill in the blank 3f5d6e03dfee056_14
Central	fill in the blank 3f5d6e03dfee056_15	fill in the blank 3f5d6e03dfee056_16	fill in the blank 3f5d6e03dfee056_17
West	fill in the blank 3f5d6e03dfee056_18	fill in the blank 3f5d6e03dfee056_19	fill in the blank 3f5d6e03dfee056_20
Total	fill in the blank 3f5d6e03dfee056_21		$fill in the blank 3f5d6e03dfee056_22
Total revenue from sales			$fill in the blank 3f5d6e03dfee056_23