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

Celtic Company

Machining Department

Monthly Production Budget

Wages $1,355,000

Utilities 74,000

Depreciation 124,000

Total $1,553,000

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

January $1,463,000 113,000

February 1,398,000 103,000

March 1,335,000 93,000

The Machining Department supervisor has been very pleased with this performance because actual expenditures for JanuaryMarch have been less than the monthly static budget of $1,553,000. 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:

Wages per hour $22.00

Utility cost per direct labor hour $1.20

Direct labor hours per unit 0.50

Planned monthly unit production 124,000

a. Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume that depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places. 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