The production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static budget for the upcoming year:

Line Item Description	Amount
Wages	$278,000
Utilities	14,000
Depreciation	24,000
Total	$316,000

The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows:

Month	Amount Spent	Units Produced
May	$298,000	51,000
June	287,000	47,000
July	271,000	42,000

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 316,000. 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:

Line Item Description	Amount
Wages per hour	$20.00
Utility cost per direct labor hour	$1.00
Direct labor hours per unit	0.25
Planned monthly unit production	56,000

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.

Line Item Description	May	June	July
Units of production	51,000	47,000	42,000
AdvertisingRentResearch and developmentSuppliesWagesWages	$Wages	$Wages	$Wages
AdvertisingRentResearch and developmentSuppliesUtilitiesUtilities	Utilities	Utilities	Utilities
AdvertisingDepreciationRentResearch and developmentSuppliesDepreciation	Depreciation	Depreciation	Depreciation
Total	$Total	$Total	$Total
Supporting calculations:
Units of production	51,000	47,000	42,000
Hours per unit	x Hours per unit	x Hours per unit	x Hours per unit
Total hours of production	Total hours of production	Total hours of production	Total hours of production
Wages per hour	x $Wages per hour	x $Wages per hour	x $Wages per hour
Total wages	$Total wages	$Total wages	$Total wages
Total hours of production	Total hours of production	Total hours of production	Total hours of production
Utility costs per hour	x $Utility costs per hour	x $Utility costs per hour	x $Utility costs per hour
Total utilities	$Total utilities	$Total utilities	$Total utilities

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

Line Item Description	May	June	July
Total flexible budget	fill in the blank 1 of 9$	fill in the blank 2 of 9$	fill in the blank 3 of 9$
Actual cost	fill in the blank 4 of 9	fill in the blank 5 of 9	fill in the blank 6 of 9
Excess of actual cost over budget	fill in the blank 7 of 9$	fill in the blank 8 of 9$	fill in the blank 9 of 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