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	$526,000
Utilities	25,000
Depreciation	41,000
Total	$592,000

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	$557,000		127,000
June	529,000		115,000
July	505,000		104,000

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 592,000. 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	$0.90
Direct labor hours per unit	0.20
Planned monthly unit production	138,000

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.

Hagerstown Company Machining Department Budget For the Three Months Ending July 31

	May	June	July
Units of production	127,000	115,000	104,000
AdvertisingRentResearch and developmentSuppliesWagesWages	$Wages	$Wages	$Wages
AdvertisingRentResearch and developmentSuppliesUtilitiesUtilities	Utilities	Utilities	Utilities
AdvertisingDepreciationRentResearch and developmentSuppliesDepreciation	Depreciation	Depreciation	Depreciation
Total	$fill in the blank b2bd8e031056021_13	$fill in the blank b2bd8e031056021_14	$fill in the blank b2bd8e031056021_15
Supporting calculations:
Units of production	127,000	115,000	104,000
Hours per unit	x fill in the blank b2bd8e031056021_16	x fill in the blank b2bd8e031056021_17	x fill in the blank b2bd8e031056021_18
Total hours of production	fill in the blank b2bd8e031056021_19	fill in the blank b2bd8e031056021_20	fill in the blank b2bd8e031056021_21
Wages per hour	x $fill in the blank b2bd8e031056021_22	x $fill in the blank b2bd8e031056021_23	x $fill in the blank b2bd8e031056021_24
Total wages	$fill in the blank b2bd8e031056021_25	$fill in the blank b2bd8e031056021_26	$fill in the blank b2bd8e031056021_27
Total hours of production	fill in the blank b2bd8e031056021_28	fill in the blank b2bd8e031056021_29	fill in the blank b2bd8e031056021_30
Utility costs per hour	x $fill in the blank b2bd8e031056021_31	x $fill in the blank b2bd8e031056021_32	x $fill in the blank b2bd8e031056021_33
Total utilities	$fill in the blank b2bd8e031056021_34	$fill in the blank b2bd8e031056021_35	$fill in the blank b2bd8e031056021_36

Feedback

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

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

	May	June	July
Total flexible budget	$fill in the blank 0222f6f24038fdd_1	$fill in the blank 0222f6f24038fdd_2	$fill in the blank 0222f6f24038fdd_3
Actual cost	fill in the blank 0222f6f24038fdd_4	fill in the blank 0222f6f24038fdd_5	fill in the blank 0222f6f24038fdd_6
Excess of actual cost over budget	$fill in the blank 0222f6f24038fdd_7	$fill in the blank 0222f6f24038fdd_8	$fill in the blank 0222f6f24038fdd_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