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	$984,000
Utilities	47,000
Depreciation	78,000
Total	$1,109,000

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	$1,044,000		95,000
February	1,000,000		87,000
March	948,000		78,000

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 $1,109,000. 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	$19.00
Utility cost per direct labor hour	$0.90
Direct labor hours per unit	0.50
Planned monthly unit production	104,000

Question Content Area

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.

Celtic Company-Machining Department Flexible Production Budget For the Three Months Ending March 31

	January	February	March
Units of production	fill in the blank cf3152f6a038022_1	fill in the blank cf3152f6a038022_2	fill in the blank cf3152f6a038022_3
Wages	$fill in the blank cf3152f6a038022_4	$fill in the blank cf3152f6a038022_5	$fill in the blank cf3152f6a038022_6
Utilities	fill in the blank cf3152f6a038022_7	fill in the blank cf3152f6a038022_8	fill in the blank cf3152f6a038022_9
Depreciation	fill in the blank cf3152f6a038022_10	fill in the blank cf3152f6a038022_11	fill in the blank cf3152f6a038022_12
Total	$fill in the blank cf3152f6a038022_13	$fill in the blank cf3152f6a038022_14	$fill in the blank cf3152f6a038022_15

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 4282ccfe4010038_1	$fill in the blank 4282ccfe4010038_2	$fill in the blank 4282ccfe4010038_3
Total flexible budget	fill in the blank 4282ccfe4010038_4	fill in the blank 4282ccfe4010038_5	fill in the blank 4282ccfe4010038_6
Excess of actual cost over budget	$fill in the blank 4282ccfe4010038_7	$fill in the blank 4282ccfe4010038_8	$fill in the blank 4282ccfe4010038_9

What does this comparison suggest?

The Machining Department has performed better than originally thought.	YesNo
The department is spending more than would be expected.	YesNo