Statie 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: Magerstown Company Machining Department Monthly Production Budget Wages 5453,000 Utilities 26,000 Depreciation 42,000 Total $521,000 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 5491,000 104,000 Jone 465,000 4.000 July 445,000 85,000 The Machining Department supervisor has been very pleased with this performance because actual expenditures for May-July have been wgnificantly less than the monthly static duo of 521,000. However, the plant manager believes that the budget should not remain feed for every month but should flexor 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 116.00 Utility cost per direct labor hour 10.90 Direct labor hours per unit 0.25 Panned monthly unit production 113,000 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 May June July Units of production 104,000 94,000 85,000 Wages 0.25 Utilities 4.0 x X . Depreciation 2,000 42,00 42,000 4 X 9490 490 94,000 104,000 4:28 3.000 85,000 0.25 0.25 23.500 21,290 Total Supporting calculations Units of production Hours per unit Total hours of production Wages per hour Total wages Total hours of production y costs per hour X 16 1. 39.00 34,0 0.00 X 2000 6.9 . Total units 14,720 X 1. X IX Peach Check My W For each level of production show wagen, wie and depreciation July b. Compare the flexible budget with the actual expenditures for the first three months. May June Total flexible budget Actual con Excess of actual cost over budget What does this comparisons? The Machining Department has performed better than originally thought. The department is spending more than would be expected Yes