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

Line Item Description	Amount
Wages	$778,000
Utilities	55,000
Depreciation	92,000
Total	$925,000

The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows:

Month	Amount Spent	Units Produced
May	$874,000	84,000
June	840,000	77,000
July	799,000	69,000

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 925,000. 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:

Line Item Description	Amount
Wages per hour	$17.00
Utility cost per direct labor hour	$1.20
Direct labor hours per unit	0.50
Planned monthly unit production	92,000

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

Hagerstown Company Machining Department Budget For the Three Months Ending July 31 Supporting calculations: Units of production Hours per unit Total wages Total hours of production Utility costs per hour Total utilities b. Compare the flexible budget with the actual expenditures for the first three months. The Machining Department has performed better than originally thought. The department is spending more than would be expected