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 | $984,000 |
Utilities | 62,000 |
Depreciation | 104,000 |
Total | $1,150,000 |
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 | $1,085,000 | 95,000 | ||
June | 1,042,000 | 87,000 | ||
July | 990,000 | 78,000 |
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 1,150,000. 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 | $1.20 |
Direct labor hours per unit | 0.50 |
Planned monthly unit production | 104,000 |
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.
May | June | July | |
Units of production | 95,000 | 87,000 | 78,000 |
AdvertisingRentResearch and developmentSuppliesWages | $- Select - | $- Select - | $- Select - |
AdvertisingRentResearch and developmentSuppliesUtilities | - Select - | - Select - | - Select - |
AdvertisingDepreciationRentResearch and developmentSupplies | - Select - | - Select - | - Select - |
Total | $fill in the blank f50fbe041017fc0_13 | $fill in the blank f50fbe041017fc0_14 | $fill in the blank f50fbe041017fc0_15 |
Supporting calculations: | |||
Units of production | 95,000 | 87,000 | 78,000 |
Hours per unit | x fill in the blank f50fbe041017fc0_16 | x fill in the blank f50fbe041017fc0_17 | x fill in the blank f50fbe041017fc0_18 |
Total hours of production | fill in the blank f50fbe041017fc0_19 | fill in the blank f50fbe041017fc0_20 | fill in the blank f50fbe041017fc0_21 |
Wages per hour | x $fill in the blank f50fbe041017fc0_22 | x $fill in the blank f50fbe041017fc0_23 | x $fill in the blank f50fbe041017fc0_24 |
Total wages | $fill in the blank f50fbe041017fc0_25 | $fill in the blank f50fbe041017fc0_26 | $fill in the blank f50fbe041017fc0_27 |
Total hours of production | fill in the blank f50fbe041017fc0_28 | fill in the blank f50fbe041017fc0_29 | fill in the blank f50fbe041017fc0_30 |
Utility costs per hour | x $fill in the blank f50fbe041017fc0_31 | x $fill in the blank f50fbe041017fc0_32 | x $fill in the blank f50fbe041017fc0_33 |
Total utilities | $fill in the blank f50fbe041017fc0_34 | $fill in the blank f50fbe041017fc0_35 | $fill in the blank f50fbe041017fc0_36 |
b. Compare the flexible budget with the actual expenditures for the first three months.
May | June | July | |
Total flexible budget | $fill in the blank 968971fbafb703e_1 | $fill in the blank 968971fbafb703e_2 | $fill in the blank 968971fbafb703e_3 |
Actual cost | fill in the blank 968971fbafb703e_4 | fill in the blank 968971fbafb703e_5 | fill in the blank 968971fbafb703e_6 |
Excess of actual cost over budget | $fill in the blank 968971fbafb703e_7 | $fill in the blank 968971fbafb703e_8 | $fill in the blank 968971fbafb703e_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 |
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