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	$385,000
Utilities	18,000
Depreciation	31,000
Total	$434,000

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	$409,000		84,000
June	392,000		77,000
July	371,000		69,000

The Machining Department supervisor has been very pleased with this performance because actual expenditures for May-July have been significantly less than the monthly static budget of 434,000. 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	$21.00
Utility cost per direct labor hour	$1.00
Direct labor hours per unit	0.20
Planned monthly unit production	92,000

Question Content Area

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.

	May	June	July
Units of production	84,000	77,000	69,000
AdvertisingRentResearch and developmentSuppliesWagesWages	$Wages	$Wages	$Wages
AdvertisingRentResearch and developmentSuppliesUtilitiesUtilities	Utilities	Utilities	Utilities
AdvertisingDepreciationRentResearch and developmentSuppliesDepreciation	Depreciation	Depreciation	Depreciation
Total	$fill in the blank 782c01f6805d059_13	$fill in the blank 782c01f6805d059_14	$fill in the blank 782c01f6805d059_15
Supporting calculations:
Units of production	84,000	77,000	69,000
Hours per unit	xfill in the blank 782c01f6805d059_16	xfill in the blank 782c01f6805d059_17	xfill in the blank 782c01f6805d059_18
Total hours of production	fill in the blank 782c01f6805d059_19	fill in the blank 782c01f6805d059_20	fill in the blank 782c01f6805d059_21
Wages per hour	x $fill in the blank 782c01f6805d059_22	x $fill in the blank 782c01f6805d059_23	x $fill in the blank 782c01f6805d059_24
Total wages	$fill in the blank 782c01f6805d059_25	$fill in the blank 782c01f6805d059_26	$fill in the blank 782c01f6805d059_27
Total hours of production	fill in the blank 782c01f6805d059_28	fill in the blank 782c01f6805d059_29	fill in the blank 782c01f6805d059_30
Utility costs per hour	x $fill in the blank 782c01f6805d059_31	x $fill in the blank 782c01f6805d059_32	x $fill in the blank 782c01f6805d059_33
Total utilities	$fill in the blank 782c01f6805d059_34	$fill in the blank 782c01f6805d059_35	$fill in the blank 782c01f6805d059_36

Question Content Area

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

	May	June	July
Total flexible budget	$fill in the blank 77284b04ff8ff94_1	$fill in the blank 77284b04ff8ff94_2	$fill in the blank 77284b04ff8ff94_3
Actual cost	fill in the blank 77284b04ff8ff94_4	fill in the blank 77284b04ff8ff94_5	fill in the blank 77284b04ff8ff94_6
Excess of actual cost over budget	$fill in the blank 77284b04ff8ff94_7	$fill in the blank 77284b04ff8ff94_8	$fill in the blank 77284b04ff8ff94_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.