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	$746,000
Utilities	39,000
Depreciation	65,000
Total	$850,000

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	$801,000		72,000
June	758,000		65,000
July	727,000		59,000

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 850,000. 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	$1.00
Direct labor hours per unit	0.50
Planned monthly unit production	78,000

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	72,000	65,000	59,000
Wages	$fill in the blank 553662f63fa0fa9_2	$fill in the blank 553662f63fa0fa9_3	$fill in the blank 553662f63fa0fa9_4
Utilities	fill in the blank 553662f63fa0fa9_6	fill in the blank 553662f63fa0fa9_7	fill in the blank 553662f63fa0fa9_8
Depreciation	fill in the blank 553662f63fa0fa9_10	fill in the blank 553662f63fa0fa9_11	fill in the blank 553662f63fa0fa9_12
Total	$fill in the blank 553662f63fa0fa9_13	$fill in the blank 553662f63fa0fa9_14	$fill in the blank 553662f63fa0fa9_15
Supporting calculations:
Units of production	72,000	65,000	59,000
Hours per unit	x fill in the blank 553662f63fa0fa9_16	x fill in the blank 553662f63fa0fa9_17	x fill in the blank 553662f63fa0fa9_18
Total hours of production	fill in the blank 553662f63fa0fa9_19	fill in the blank 553662f63fa0fa9_20	fill in the blank 553662f63fa0fa9_21
Wages per hour	x $fill in the blank 553662f63fa0fa9_22	x $fill in the blank 553662f63fa0fa9_23	x $fill in the blank 553662f63fa0fa9_24
Total wages	$fill in the blank 553662f63fa0fa9_25	$fill in the blank 553662f63fa0fa9_26	$fill in the blank 553662f63fa0fa9_27
Total hours of production	fill in the blank 553662f63fa0fa9_28	fill in the blank 553662f63fa0fa9_29	fill in the blank 553662f63fa0fa9_30
Utility costs per hour	x $fill in the blank 553662f63fa0fa9_31	x $fill in the blank 553662f63fa0fa9_32	x $fill in the blank 553662f63fa0fa9_33
Total utilities	$fill in the blank 553662f63fa0fa9_34	$fill in the blank 553662f63fa0fa9_35	$fill in the blank 553662f63fa0fa9_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 2dbccdf5bfef040_1	$fill in the blank 2dbccdf5bfef040_2	$fill in the blank 2dbccdf5bfef040_3
Actual cost	fill in the blank 2dbccdf5bfef040_4	fill in the blank 2dbccdf5bfef040_5	fill in the blank 2dbccdf5bfef040_6
Excess of actual cost over budget	$fill in the blank 2dbccdf5bfef040_7	$fill in the blank 2dbccdf5bfef040_8	$fill in the blank 2dbccdf5bfef040_9

What does this comparison suggest?

The Machining Department has performed better than originally thought.	No
The department is spending more than would be expected.	Yes