The production supervisor of the Machining Department for Celtic Company agreed to the following monthly static budget for the upcoming year: Celtic Company Machining Department Monthly Production Budget Wages $306,000 Utilities 20,000 Depreciation 33,000 Total $359,000 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 January $338,000 66,000 February 323,000 60,000 March 308,000 54,000 The Machining Department supervisor has been very pleased with this performance because actual expenditures for January–March have been less than the monthly static budget of $359,000. 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 $17.00 Utility cost per direct labor hour $1.10 Direct labor hours per unit 0.25 Planned monthly unit production 72,000 a. Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume that depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places. Celtic Company-Machining DepartmentFlexible Production BudgetFor the Three Months Ending March 31 January February March Units of production fill in the blank dbec790c901f048_1 fill in the blank dbec790c901f048_2 fill in the blank dbec790c901f048_3 Wages $fill in the blank dbec790c901f048_4 $fill in the blank dbec790c901f048_5 $fill in the blank dbec790c901f048_6 Utilities fill in the blank dbec790c901f048_7 fill in the blank dbec790c901f048_8 fill in the blank dbec790c901f048_9 Depreciation fill in the blank dbec790c901f048_10 fill in the blank dbec790c901f048_11 fill in the blank dbec790c901f048_12 Total $fill in the blank dbec790c901f048_13 $fill in the blank dbec790c901f048_14 $fill in the blank dbec790c901f048_15 b. Compare the flexible budget with the actual expenditures for the first three months. January February March Actual cost $fill in the blank 710455030057ff0_1 $fill in the blank 710455030057ff0_2 $fill in the blank 710455030057ff0_3 Total flexible budget fill in the blank 710455030057ff0_4 fill in the blank 710455030057ff0_5 fill in the blank 710455030057ff0_6 Excess of actual cost over budget $fill in the blank 710455030057ff0_7 $fill in the blank 710455030057ff0_8 $fill in the blank 710455030057ff0_9 What does this comparison suggest? The Machining Department has performed better than originally thought. The department is spending more than would be expected.

The production supervisor of the Machining Department for Celtic Company agreed to the following monthly static budget for the upcoming year: Celtic Company Machining Department Monthly Production Budget Wages $306,000 Utilities 20,000 Depreciation 33,000 Total $359,000 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 January $338,000 66,000 February 323,000 60,000 March 308,000 54,000 The Machining Department supervisor has been very pleased with this performance because actual expenditures for January–March have been less than the monthly static budget of $359,000. 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 $17.00 Utility cost per direct labor hour $1.10 Direct labor hours per unit 0.25 Planned monthly unit production 72,000 a. Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume that depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places. Celtic Company-Machining DepartmentFlexible Production BudgetFor the Three Months Ending March 31 January February March Units of production fill in the blank dbec790c901f048_1 fill in the blank dbec790c901f048_2 fill in the blank dbec790c901f048_3 Wages $fill in the blank dbec790c901f048_4 $fill in the blank dbec790c901f048_5 $fill in the blank dbec790c901f048_6 Utilities fill in the blank dbec790c901f048_7 fill in the blank dbec790c901f048_8 fill in the blank dbec790c901f048_9 Depreciation fill in the blank dbec790c901f048_10 fill in the blank dbec790c901f048_11 fill in the blank dbec790c901f048_12 Total $fill in the blank dbec790c901f048_13 $fill in the blank dbec790c901f048_14 $fill in the blank dbec790c901f048_15 b. Compare the flexible budget with the actual expenditures for the first three months. January February March Actual cost $fill in the blank 710455030057ff0_1 $fill in the blank 710455030057ff0_2 $fill in the blank 710455030057ff0_3 Total flexible budget fill in the blank 710455030057ff0_4 fill in the blank 710455030057ff0_5 fill in the blank 710455030057ff0_6 Excess of actual cost over budget $fill in the blank 710455030057ff0_7 $fill in the blank 710455030057ff0_8 $fill in the blank 710455030057ff0_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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Question

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

Celtic Company Machining Department Monthly Production Budget
Wages	$306,000
Utilities	20,000
Depreciation	33,000
Total	$359,000

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
January	$338,000		66,000
February	323,000		60,000
March	308,000		54,000

The Machining Department supervisor has been very pleased with this performance because actual expenditures for January–March have been less than the monthly static budget of $359,000. 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	$17.00
Utility cost per direct labor hour	$1.10
Direct labor hours per unit	0.25
Planned monthly unit production	72,000

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

Celtic Company-Machining DepartmentFlexible Production BudgetFor the Three Months Ending March 31

	January	February	March
Units of production	fill in the blank dbec790c901f048_1	fill in the blank dbec790c901f048_2	fill in the blank dbec790c901f048_3
Wages	$fill in the blank dbec790c901f048_4	$fill in the blank dbec790c901f048_5	$fill in the blank dbec790c901f048_6
Utilities	fill in the blank dbec790c901f048_7	fill in the blank dbec790c901f048_8	fill in the blank dbec790c901f048_9
Depreciation	fill in the blank dbec790c901f048_10	fill in the blank dbec790c901f048_11	fill in the blank dbec790c901f048_12
Total	$fill in the blank dbec790c901f048_13	$fill in the blank dbec790c901f048_14	$fill in the blank dbec790c901f048_15

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

	January	February	March
Actual cost	$fill in the blank 710455030057ff0_1	$fill in the blank 710455030057ff0_2	$fill in the blank 710455030057ff0_3
Total flexible budget	fill in the blank 710455030057ff0_4	fill in the blank 710455030057ff0_5	fill in the blank 710455030057ff0_6
Excess of actual cost over budget	$fill in the blank 710455030057ff0_7	$fill in the blank 710455030057ff0_8	$fill in the blank 710455030057ff0_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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