Question
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
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 | $214,000 |
Utilities | 13,000 |
Depreciation | 21,000 |
Total | $248,000 |
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 | $233,000 | 49,000 | ||
June | 220,000 | 44,000 | ||
July | 212,000 | 40,000 |
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 248,000. 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 | $20.00 |
Utility cost per direct labor hour | $1.20 |
Direct labor hours per unit | 0.20 |
Planned monthly unit production | 53,000 |
Question Content Area
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.
May | June | July | |
Units of production | 49,000 | 44,000 | 40,000 |
AdvertisingRentResearch and developmentSuppliesWages | $- Select - | $- Select - | $- Select - |
AdvertisingRentResearch and developmentSuppliesUtilities | - Select - | - Select - | - Select - |
AdvertisingDepreciationRentResearch and developmentSupplies | - Select - | - Select - | - Select - |
Total | $fill in the blank 7d4150fd0fd1f80_13 | $fill in the blank 7d4150fd0fd1f80_14 | $fill in the blank 7d4150fd0fd1f80_15 |
Supporting calculations: | |||
Units of production | 49,000 | 44,000 | 40,000 |
Hours per unit | x fill in the blank 7d4150fd0fd1f80_16 | x fill in the blank 7d4150fd0fd1f80_17 | x fill in the blank 7d4150fd0fd1f80_18 |
Total hours of production | fill in the blank 7d4150fd0fd1f80_19 | fill in the blank 7d4150fd0fd1f80_20 | fill in the blank 7d4150fd0fd1f80_21 |
Wages per hour | x $fill in the blank 7d4150fd0fd1f80_22 | x $fill in the blank 7d4150fd0fd1f80_23 | x $fill in the blank 7d4150fd0fd1f80_24 |
Total wages | $fill in the blank 7d4150fd0fd1f80_25 | $fill in the blank 7d4150fd0fd1f80_26 | $fill in the blank 7d4150fd0fd1f80_27 |
Total hours of production | fill in the blank 7d4150fd0fd1f80_28 | fill in the blank 7d4150fd0fd1f80_29 | fill in the blank 7d4150fd0fd1f80_30 |
Utility costs per hour | x $fill in the blank 7d4150fd0fd1f80_31 | x $fill in the blank 7d4150fd0fd1f80_32 | x $fill in the blank 7d4150fd0fd1f80_33 |
Total utilities | $fill in the blank 7d4150fd0fd1f80_34 | $fill in the blank 7d4150fd0fd1f80_35 | $fill in the blank 7d4150fd0fd1f80_36 |
Question Content Area
b. Compare the flexible budget with the actual expenditures for the first three months.
May | June | July | |
Total flexible budget | $fill in the blank 33ce9a0bc07a067_1 | $fill in the blank 33ce9a0bc07a067_2 | $fill in the blank 33ce9a0bc07a067_3 |
Actual cost | fill in the blank 33ce9a0bc07a067_4 | fill in the blank 33ce9a0bc07a067_5 | fill in the blank 33ce9a0bc07a067_6 |
Excess of actual cost over budget | $fill in the blank 33ce9a0bc07a067_7 | $fill in the blank 33ce9a0bc07a067_8 | $fill in the blank 33ce9a0bc07a067_9 |
What does this comparison suggest?
The Machining Department has performed better than originally thought. | YesNo |
The department is spending more than would be expected. | YesNo |
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