tatic Budget versus Flexible Budget 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 $348,000 Utilities 22,000 Depreciation 36,000 Total $406,000 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 $382,000 76,000 June 364,000 69,000 July 347,000 62,000 The Machining Department supervisor has been very pleased with this performance because actual expenditures for May–July have been significantly less than the monthly static budget of 406,000. 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 $21.00 Utility cost per direct labor hour $1.30 Direct labor hours per unit 0.20 Planned monthly unit production 82,000 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 76,000 69,000 62,000 $fill in the blank 24e9f4047fd901e_2 $fill in the blank 24e9f4047fd901e_3 $fill in the blank 24e9f4047fd901e_4 fill in the blank 24e9f4047fd901e_6 fill in the blank 24e9f4047fd901e_7 fill in the blank 24e9f4047fd901e_8 fill in the blank 24e9f4047fd901e_10 fill in the blank 24e9f4047fd901e_11 fill in the blank 24e9f4047fd901e_12 Total $fill in the blank 24e9f4047fd901e_13 $fill in the blank 24e9f4047fd901e_14 $fill in the blank 24e9f4047fd901e_15 Supporting calculations: Units of production 76,000 69,000 62,000 Hours per unit x fill in the blank 24e9f4047fd901e_16 x fill in the blank 24e9f4047fd901e_17 x fill in the blank 24e9f4047fd901e_18 Total hours of production fill in the blank 24e9f4047fd901e_19 fill in the blank 24e9f4047fd901e_20 fill in the blank 24e9f4047fd901e_21 Wages per hour x $fill in the blank 24e9f4047fd901e_22 x $fill in the blank 24e9f4047fd901e_23 x $fill in the blank 24e9f4047fd901e_24 Total wages $fill in the blank 24e9f4047fd901e_25 $fill in the blank 24e9f4047fd901e_26 $fill in the blank 24e9f4047fd901e_27 Total hours of production fill in the blank 24e9f4047fd901e_28 fill in the blank 24e9f4047fd901e_29 fill in the blank 24e9f4047fd901e_30 Utility costs per hour x $fill in the blank 24e9f4047fd901e_31 x $fill in the blank 24e9f4047fd901e_32 x $fill in the blank 24e9f4047fd901e_33 Total utilities $fill in the blank 24e9f4047fd901e_34 $fill in the blank 24e9f4047fd901e_35 $fill in the blank 24e9f4047fd901e_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 603f5f000019056_1 $fill in the blank 603f5f000019056_2 $fill in the blank 603f5f000019056_3 Actual cost fill in the blank 603f5f000019056_4 fill in the blank 603f5f000019056_5 fill in the blank 603f5f000019056_6 Excess of actual cost over budget $fill in the blank 603f5f000019056_7 $fill in the blank 603f5f000019056_8 $fill in the blank 603f5f000019056_9 What does this comparison suggest? The Machining Department has performed better than originally thought. The department is spending more than would be expected.

tatic Budget versus Flexible Budget 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 $348,000 Utilities 22,000 Depreciation 36,000 Total $406,000 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 $382,000 76,000 June 364,000 69,000 July 347,000 62,000 The Machining Department supervisor has been very pleased with this performance because actual expenditures for May–July have been significantly less than the monthly static budget of 406,000. 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 $21.00 Utility cost per direct labor hour $1.30 Direct labor hours per unit 0.20 Planned monthly unit production 82,000 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 76,000 69,000 62,000 $fill in the blank 24e9f4047fd901e_2 $fill in the blank 24e9f4047fd901e_3 $fill in the blank 24e9f4047fd901e_4 fill in the blank 24e9f4047fd901e_6 fill in the blank 24e9f4047fd901e_7 fill in the blank 24e9f4047fd901e_8 fill in the blank 24e9f4047fd901e_10 fill in the blank 24e9f4047fd901e_11 fill in the blank 24e9f4047fd901e_12 Total $fill in the blank 24e9f4047fd901e_13 $fill in the blank 24e9f4047fd901e_14 $fill in the blank 24e9f4047fd901e_15 Supporting calculations: Units of production 76,000 69,000 62,000 Hours per unit x fill in the blank 24e9f4047fd901e_16 x fill in the blank 24e9f4047fd901e_17 x fill in the blank 24e9f4047fd901e_18 Total hours of production fill in the blank 24e9f4047fd901e_19 fill in the blank 24e9f4047fd901e_20 fill in the blank 24e9f4047fd901e_21 Wages per hour x $fill in the blank 24e9f4047fd901e_22 x $fill in the blank 24e9f4047fd901e_23 x $fill in the blank 24e9f4047fd901e_24 Total wages $fill in the blank 24e9f4047fd901e_25 $fill in the blank 24e9f4047fd901e_26 $fill in the blank 24e9f4047fd901e_27 Total hours of production fill in the blank 24e9f4047fd901e_28 fill in the blank 24e9f4047fd901e_29 fill in the blank 24e9f4047fd901e_30 Utility costs per hour x $fill in the blank 24e9f4047fd901e_31 x $fill in the blank 24e9f4047fd901e_32 x $fill in the blank 24e9f4047fd901e_33 Total utilities $fill in the blank 24e9f4047fd901e_34 $fill in the blank 24e9f4047fd901e_35 $fill in the blank 24e9f4047fd901e_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 603f5f000019056_1 $fill in the blank 603f5f000019056_2 $fill in the blank 603f5f000019056_3 Actual cost fill in the blank 603f5f000019056_4 fill in the blank 603f5f000019056_5 fill in the blank 603f5f000019056_6 Excess of actual cost over budget $fill in the blank 603f5f000019056_7 $fill in the blank 603f5f000019056_8 $fill in the blank 603f5f000019056_9 What does this comparison suggest? The Machining Department has performed better than originally thought. The department is spending more than would be expected.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 3E: Static budget versus flexible budget The production supervisor of the Machining Department for...

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Static Budget versus Flexible Budget

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	$348,000
Utilities	22,000
Depreciation	36,000
Total	$406,000

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	$382,000		76,000
June	364,000		69,000
July	347,000		62,000

The Machining Department supervisor has been very pleased with this performance because actual expenditures for May–July have been significantly less than the monthly static budget of 406,000. 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	$21.00
Utility cost per direct labor hour	$1.30
Direct labor hours per unit	0.20
Planned monthly unit production	82,000

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	76,000	69,000	62,000
	$fill in the blank 24e9f4047fd901e_2	$fill in the blank 24e9f4047fd901e_3	$fill in the blank 24e9f4047fd901e_4
	fill in the blank 24e9f4047fd901e_6	fill in the blank 24e9f4047fd901e_7	fill in the blank 24e9f4047fd901e_8
	fill in the blank 24e9f4047fd901e_10	fill in the blank 24e9f4047fd901e_11	fill in the blank 24e9f4047fd901e_12
Total	$fill in the blank 24e9f4047fd901e_13	$fill in the blank 24e9f4047fd901e_14	$fill in the blank 24e9f4047fd901e_15
Supporting calculations:
Units of production	76,000	69,000	62,000
Hours per unit	x fill in the blank 24e9f4047fd901e_16	x fill in the blank 24e9f4047fd901e_17	x fill in the blank 24e9f4047fd901e_18
Total hours of production	fill in the blank 24e9f4047fd901e_19	fill in the blank 24e9f4047fd901e_20	fill in the blank 24e9f4047fd901e_21
Wages per hour	x $fill in the blank 24e9f4047fd901e_22	x $fill in the blank 24e9f4047fd901e_23	x $fill in the blank 24e9f4047fd901e_24
Total wages	$fill in the blank 24e9f4047fd901e_25	$fill in the blank 24e9f4047fd901e_26	$fill in the blank 24e9f4047fd901e_27
Total hours of production	fill in the blank 24e9f4047fd901e_28	fill in the blank 24e9f4047fd901e_29	fill in the blank 24e9f4047fd901e_30
Utility costs per hour	x $fill in the blank 24e9f4047fd901e_31	x $fill in the blank 24e9f4047fd901e_32	x $fill in the blank 24e9f4047fd901e_33
Total utilities	$fill in the blank 24e9f4047fd901e_34	$fill in the blank 24e9f4047fd901e_35	$fill in the blank 24e9f4047fd901e_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 603f5f000019056_1	$fill in the blank 603f5f000019056_2	$fill in the blank 603f5f000019056_3
Actual cost	fill in the blank 603f5f000019056_4	fill in the blank 603f5f000019056_5	fill in the blank 603f5f000019056_6
Excess of actual cost over budget	$fill in the blank 603f5f000019056_7	$fill in the blank 603f5f000019056_8	$fill in the blank 603f5f000019056_9

What does this comparison suggest?

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

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