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 | $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. |
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