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 $$427,000$

Utilities $34,000$

Depreciation $56,000$

Total $$517,000$

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 $$488,000112,000$

June $468,000102,000$

July $448,00092,000$

The Machining Department supervisor has been very pleased with this performance because actual expenditures for May$$July have been significantly less than the monthly static budget of $517,000.$ However, the plant manager believes that the budget should not remain fixed for every month but should $$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 $$14\mathrm{.}00$

Utility cost per direct labor hour $$1\mathrm{.}10$

Direct labor hours per unit $0\mathrm{.}25$

Planned monthly unit production $122,000$

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 $31$

Line Item Description May June July

Units of production $112,000102,00092,000$

$$-$ Select $-$

$$-$ Select $-$

$$-$ Select $-$

$-$ Select $-$

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Total $Total

$Total

$Total

Supporting calculations:

Units of production $112,000102,00092,000$

Hours per unit x Hours per unit

x Hours per unit

x Hours per unit

Total hours of production Total hours of production

Total hours of production

Total hours of production

Wages per hour x $Wages per hour

x $Wages per hour

x $Wages per hour

Total wages $Total wages

$Total wages

$Total wages

Total hours of production Total hours of production

Total hours of production

Total hours of production

Utility costs per hour x $Utility costs per hour

x $Utility costs per hour

x $Utility costs per hour

Total utilities $Total utilities

$Total utilities

$Total utilities