Static Budget vs$.$ Flexible Budget

The production supervisor of the Painting Department for Whitley Company agreed to the following monthly static budget for the upcoming year:

WHITLEY COMPANY

Painting Department

Monthly Production Budget

Wages $$339,000$

Utilities $16,000$

Depreciation $27,000$

Total $$382,000$

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

Amount Spent Units Produced

January $$360,00074,000$

February $346,00068,000$

March $328,00061,000$

The Painting Department supervisor has been very pleased with this performance, since actual expenditures have been less than the monthly budget. 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 Painting Department. Additional budget information for the Painting Department is as follows:

Wages per hour $$21\mathrm{.}00$

Utility cost per direct labor hour $$1\mathrm{.}00$

Direct labor hours per unit $0\mathrm{.}20$ hrs$.$

Planned unit production $81,000$ units

Question Content Area

a$.$ Prepare a flexible budget for the actual units produced for January, February, and March in the Painting Department. Assume depreciation is a fixed cost. Enter all amounts as positive numbers. If required, round per unit amounts to the nearest cent.

WHITLEY COMPANY

Painting Department

For the Three Months Ending March $31$

January February March

Units of production $74,00068,00061,000$

Wages $fill in the blank $1$e$83$d$100$b$043$f$85\_1$

$fill in the blank $1$e$83$d$100$b$043$f$85\_2$

$fill in the blank $1$e$83$d$100$b$043$f$85\_3$

Utilities fill in the blank $1$e$83$d$100$b$043$f$85\_4$

fill in the blank $1$e$83$d$100$b$043$f$85\_5$

fill in the blank $1$e$83$d$100$b$043$f$85\_6$

Depreciation fill in the blank $1$e$83$d$100$b$043$f$85\_7$

fill in the blank $1$e$83$d$100$b$043$f$85\_8$

fill in the blank $1$e$83$d$100$b$043$f$85\_9$

Total $fill in the blank $1$e$83$d$100$b$043$f$85\_10$

$fill in the blank $1$e$83$d$100$b$043$f$85\_11$

$fill in the blank $1$e$83$d$100$b$043$f$85\_12$

Question Content Area

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

January February March

Actual cost $fill in the blank $5$b$8560$fb$3$fb$6$ff$0\_1$

$fill in the blank $5$b$8560$fb$3$fb$6$ff$0\_2$

$fill in the blank $5$b$8560$fb$3$fb$6$ff$0\_3$

Total flexible budget fill in the blank $5$b$8560$fb$3$fb$6$ff$0\_4$

fill in the blank $5$b$8560$fb$3$fb$6$ff$0\_5$

fill in the blank $5$b$8560$fb$3$fb$6$ff$0\_6$

$fill in the blank $5$b$8560$fb$3$fb$6$ff$0\_8$

$fill in the blank $5$b$8560$fb$3$fb$6$ff$0\_9$

$fill in the blank $5$b$8560$fb$3$fb$6$ff$0\_10$

What does this comparison suggest?

Has the Painting Department performed better than originally thought?

Is the department spending more than expected?