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	$525,000
Utilities	29,000
Depreciation	49,000
Total	$603,000

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	$568,000		107,000
June	545,000		98,000
July	518,000		88,000

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 603,000. 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	$18.00
Utility cost per direct labor hour	$1.00
Direct labor hours per unit	0.25
Planned monthly unit production	117,000

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	107,000	98,000	88,000
AdvertisingRentResearch and developmentSuppliesWagesWages	$Wages	$Wages	$Wages
AdvertisingRentResearch and developmentSuppliesUtilitiesUtilities	Utilities	Utilities	Utilities
AdvertisingDepreciationRentResearch and developmentSuppliesDepreciation	Depreciation	Depreciation	Depreciation
Total	$fill in the blank 8fbee703f06c07c_13	$fill in the blank 8fbee703f06c07c_14	$fill in the blank 8fbee703f06c07c_15
Supporting calculations:
Units of production	107,000	98,000	88,000
Hours per unit	xfill in the blank 8fbee703f06c07c_16	xfill in the blank 8fbee703f06c07c_17	xfill in the blank 8fbee703f06c07c_18
Total hours of production	fill in the blank 8fbee703f06c07c_19	fill in the blank 8fbee703f06c07c_20	fill in the blank 8fbee703f06c07c_21
Wages per hour	x $fill in the blank 8fbee703f06c07c_22	x $fill in the blank 8fbee703f06c07c_23	x $fill in the blank 8fbee703f06c07c_24
Total wages	$fill in the blank 8fbee703f06c07c_25	$fill in the blank 8fbee703f06c07c_26	$fill in the blank 8fbee703f06c07c_27
Total hours of production	fill in the blank 8fbee703f06c07c_28	fill in the blank 8fbee703f06c07c_29	fill in the blank 8fbee703f06c07c_30
Utility costs per hour	x $fill in the blank 8fbee703f06c07c_31	x $fill in the blank 8fbee703f06c07c_32	x $fill in the blank 8fbee703f06c07c_33
Total utilities	$fill in the blank 8fbee703f06c07c_34	$fill in the blank 8fbee703f06c07c_35	$fill in the blank 8fbee703f06c07c_36

Feedback Area

Feedback

For each level of production, show wages, utilities, and depreciation.

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 892e0e002ff3fd7_1	$fill in the blank 892e0e002ff3fd7_2	$fill in the blank 892e0e002ff3fd7_3
Actual cost	fill in the blank 892e0e002ff3fd7_4	fill in the blank 892e0e002ff3fd7_5	fill in the blank 892e0e002ff3fd7_6
Excess of actual cost over budget	$fill in the blank 892e0e002ff3fd7_7	$fill in the blank 892e0e002ff3fd7_8	$fill in the blank 892e0e002ff3fd7_9

What does this comparison suggest?

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