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

Niland Company Machining Department Monthly Production BudgetWages$701,000Utilities32,000Depreciation54,000Total$787,000

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

Amount SpentUnits ProducedJanuary$741,000 117,000 February709,000 107,000 March673,000 96,000

The Machining Department supervisor has been very pleased with this performance because actual expenditures for JanuaryMarch have been significantly less than the monthly static budget of 787,000. 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$22Utility cost per direct labor hour$1Direct labor hours per unit0.25Planned monthly unit production128,000

Question Content Area

a. Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places.

JanuaryFebruaryMarchUnits of production117,000107,00096,000AdvertisingRentResearch and developmentSuppliesWages$- Select -$- Select -$- Select -AdvertisingRentResearch and developmentSuppliesUtilities- Select -- Select -- Select -AdvertisingDepreciationRentResearch and developmentSupplies- Select -- Select -- Select -Total$fill in the blank 42362e07b01807e_13$fill in the blank 42362e07b01807e_14$fill in the blank 42362e07b01807e_15Supporting calculations: Units of production117,000107,00096,000Hours per unitxfill in the blank 42362e07b01807e_16xfill in the blank 42362e07b01807e_17xfill in the blank 42362e07b01807e_18Total hours of productionfill in the blank 42362e07b01807e_19fill in the blank 42362e07b01807e_20fill in the blank 42362e07b01807e_21Wages per hourx $fill in the blank 42362e07b01807e_22x $fill in the blank 42362e07b01807e_23x $fill in the blank 42362e07b01807e_24Total wages$fill in the blank 42362e07b01807e_25$fill in the blank 42362e07b01807e_26$fill in the blank 42362e07b01807e_27Total hours of productionfill in the blank 42362e07b01807e_28fill in the blank 42362e07b01807e_29fill in the blank 42362e07b01807e_30Utility costs per hourx $fill in the blank 42362e07b01807e_31x $fill in the blank 42362e07b01807e_32x $fill in the blank 42362e07b01807e_33Total utilities$fill in the blank 42362e07b01807e_34$fill in the blank 42362e07b01807e_35$fill in the blank 42362e07b01807e_36

Question Content Area

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

JanuaryFebruaryMarchTotal flexible budget$fill in the blank 80f01600701ffa6_1$fill in the blank 80f01600701ffa6_2$fill in the blank 80f01600701ffa6_3Actual costfill in the blank 80f01600701ffa6_4fill in the blank 80f01600701ffa6_5fill in the blank 80f01600701ffa6_6Excess of actual cost over budget$fill in the blank 80f01600701ffa6_7$fill in the blank 80f01600701ffa6_8$fill in the blank 80f01600701ffa6_9

What does this comparison suggest?

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