Question
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
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 | |
Wages | $368,000 |
Utilities | 17,000 |
Depreciation | 29,000 |
Total | $414,000 |
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 | $390,000 | 71,000 | ||
June | 368,000 | 64,000 | ||
July | 352,000 | 58,000 |
The Machining Department supervisor has been very pleased with this performance because actual expenditures for MayJuly have been significantly less than the monthly static budget of 414,000. 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 | 0.25 |
Planned monthly unit production | 77,000 |
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 | 71,000 | 64,000 | 58,000 |
Wages | $fill in the blank 63f5fafd4000fce_2 | $fill in the blank 63f5fafd4000fce_3 | $fill in the blank 63f5fafd4000fce_4 |
Utilities | fill in the blank 63f5fafd4000fce_6 | fill in the blank 63f5fafd4000fce_7 | fill in the blank 63f5fafd4000fce_8 |
Depreciation | fill in the blank 63f5fafd4000fce_10 | fill in the blank 63f5fafd4000fce_11 | fill in the blank 63f5fafd4000fce_12 |
Total | $fill in the blank 63f5fafd4000fce_13 | $fill in the blank 63f5fafd4000fce_14 | $fill in the blank 63f5fafd4000fce_15 |
Supporting calculations: | |||
Units of production | 71,000 | 64,000 | 58,000 |
Hours per unit | x fill in the blank 63f5fafd4000fce_16 | x fill in the blank 63f5fafd4000fce_17 | x fill in the blank 63f5fafd4000fce_18 |
Total hours of production | fill in the blank 63f5fafd4000fce_19 | fill in the blank 63f5fafd4000fce_20 | fill in the blank 63f5fafd4000fce_21 |
Wages per hour | x $fill in the blank 63f5fafd4000fce_22 | x $fill in the blank 63f5fafd4000fce_23 | x $fill in the blank 63f5fafd4000fce_24 |
Total wages | $fill in the blank 63f5fafd4000fce_25 | $fill in the blank 63f5fafd4000fce_26 | $fill in the blank 63f5fafd4000fce_27 |
Total hours of production | fill in the blank 63f5fafd4000fce_28 | fill in the blank 63f5fafd4000fce_29 | fill in the blank 63f5fafd4000fce_30 |
Utility costs per hour | x $fill in the blank 63f5fafd4000fce_31 | x $fill in the blank 63f5fafd4000fce_32 | x $fill in the blank 63f5fafd4000fce_33 |
Total utilities | $fill in the blank 63f5fafd4000fce_34 | $fill in the blank 63f5fafd4000fce_35 | $fill in the blank 63f5fafd4000fce_36 |
Feedback
For each level of production, show wages, utilities, and depreciation.
b. Compare the flexible budget with the actual expenditures for the first three months.
May | June | July | |
Total flexible budget | $fill in the blank 8e1f2101f061f92_1 | $fill in the blank 8e1f2101f061f92_2 | $fill in the blank 8e1f2101f061f92_3 |
Actual cost | fill in the blank 8e1f2101f061f92_4 | fill in the blank 8e1f2101f061f92_5 | fill in the blank 8e1f2101f061f92_6 |
Excess of actual cost over budget | $fill in the blank 8e1f2101f061f92_7 | $fill in the blank 8e1f2101f061f92_8 | $fill in the blank 8e1f2101f061f92_9 |
What does this comparison suggest?
The Machining Department has performed better than originally thought. | |
The department is spending more than would be expected. |
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