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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
The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows:
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 450,000. 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:
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 a. Prepare a flexible budget for the actual units produced tor May, June, and July in the MachinIIng 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
b. Compare the flexible budget with the actual expenditures for the first three months.
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.
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