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	$284,000
Utilities	25,000
Depreciation	41,000
Total	$350,000

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	$331,000		87,000
June	316,000		79,000
July	302,000		71,000

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 350,000. 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	$15.00
Utility cost per direct labor hour	$1.30
Direct labor hours per unit	0.20
Planned monthly unit production	94,000

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.

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

	May	June	July
Units of production	87,000	79,000	71,000
AdvertisingRentResearch and developmentSuppliesWages	$- Select -	$- Select -	$- Select -
AdvertisingRentResearch and developmentSuppliesUtilities	- Select -	- Select -	- Select -
AdvertisingDepreciationRentResearch and developmentSupplies	- Select -	- Select -	- Select -
Total	$fill in the blank c2448ef84fa3027_13	$fill in the blank c2448ef84fa3027_14	$fill in the blank c2448ef84fa3027_15
Supporting calculations:
Units of production	87,000	79,000	71,000
Hours per unit	x fill in the blank c2448ef84fa3027_16	x fill in the blank c2448ef84fa3027_17	x fill in the blank c2448ef84fa3027_18
Total hours of production	fill in the blank c2448ef84fa3027_19	fill in the blank c2448ef84fa3027_20	fill in the blank c2448ef84fa3027_21
Wages per hour	x $fill in the blank c2448ef84fa3027_22	x $fill in the blank c2448ef84fa3027_23	x $fill in the blank c2448ef84fa3027_24
Total wages	$fill in the blank c2448ef84fa3027_25	$fill in the blank c2448ef84fa3027_26	$fill in the blank c2448ef84fa3027_27
Total hours of production	fill in the blank c2448ef84fa3027_28	fill in the blank c2448ef84fa3027_29	fill in the blank c2448ef84fa3027_30
Utility costs per hour	x $fill in the blank c2448ef84fa3027_31	x $fill in the blank c2448ef84fa3027_32	x $fill in the blank c2448ef84fa3027_33
Total utilities	$fill in the blank c2448ef84fa3027_34	$fill in the blank c2448ef84fa3027_35	$fill in the blank c2448ef84fa3027_36

Question Content Area

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

	May	June	July
Total flexible budget
Actual cost
Excess of actual cost over budget

What does this comparison suggest?

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