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 $614,000 Utilities 36,000 Depreciation 61,000 Total $711,000 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 $671,000 128,000 June 643,000 117,000 July 611,000 105,000 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 711,000. 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 $22.00 Utility cost per direct labor hour $1.30 Direct labor hours per unit 0.20 Planned monthly unit production 140,000 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 CompanyMachining Department BudgetFor the Three Months Ending July 31 May June July Units of production 128,000 117,000 105,000 $Wages $Wages $Wages Utilities Utilities Utilities Depreciation Depreciation Depreciation Total $fill in the blank b495b908e03a06b_13 $fill in the blank b495b908e03a06b_14 $fill in the blank b495b908e03a06b_15 Supporting calculations: Units of production 128,000 117,000 105,000 Hours per unit x fill in the blank b495b908e03a06b_16 x fill in the blank b495b908e03a06b_17 x fill in the blank b495b908e03a06b_18 Total hours of production fill in the blank b495b908e03a06b_19 fill in the blank b495b908e03a06b_20 fill in the blank b495b908e03a06b_21 Wages per hour x $fill in the blank b495b908e03a06b_22 x $fill in the blan

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 $614,000 Utilities 36,000 Depreciation 61,000 Total $711,000 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 $671,000 128,000 June 643,000 117,000 July 611,000 105,000 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 711,000. 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 $22.00 Utility cost per direct labor hour $1.30 Direct labor hours per unit 0.20 Planned monthly unit production 140,000 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 CompanyMachining Department BudgetFor the Three Months Ending July 31 May June July Units of production 128,000 117,000 105,000 $Wages $Wages $Wages Utilities Utilities Utilities Depreciation Depreciation Depreciation Total $fill in the blank b495b908e03a06b_13 $fill in the blank b495b908e03a06b_14 $fill in the blank b495b908e03a06b_15 Supporting calculations: Units of production 128,000 117,000 105,000 Hours per unit x fill in the blank b495b908e03a06b_16 x fill in the blank b495b908e03a06b_17 x fill in the blank b495b908e03a06b_18 Total hours of production fill in the blank b495b908e03a06b_19 fill in the blank b495b908e03a06b_20 fill in the blank b495b908e03a06b_21 Wages per hour x $fill in the blank b495b908e03a06b_22 x $fill in the blan

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 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 CompanyMachining Department BudgetFor the Three Months Ending July 31

	May	June	July
Units of production	128,000	117,000	105,000
	$Wages	$Wages	$Wages
	Utilities	Utilities	Utilities
	Depreciation	Depreciation	Depreciation
Total	$fill in the blank b495b908e03a06b_13	$fill in the blank b495b908e03a06b_14	$fill in the blank b495b908e03a06b_15
Supporting calculations:
Units of production	128,000	117,000	105,000
Hours per unit	x fill in the blank b495b908e03a06b_16	x fill in the blank b495b908e03a06b_17	x fill in the blank b495b908e03a06b_18
Total hours of production	fill in the blank b495b908e03a06b_19	fill in the blank b495b908e03a06b_20	fill in the blank b495b908e03a06b_21
Wages per hour	x $fill in the blank b495b908e03a06b_22	x $fill in the blank b495b908e03a06b_23	x $fill in the blank b495b908e03a06b_24
Total wages	$fill in the blank b495b908e03a06b_25	$fill in the blank b495b908e03a06b_26	$fill in the blank b495b908e03a06b_27
Total hours of production	fill in the blank b495b908e03a06b_28	fill in the blank b495b908e03a06b_29	fill in the blank b495b908e03a06b_30
Utility costs per hour	x $fill in the blank b495b908e03a06b_31	x $fill in the blank b495b908e03a06b_32	x $fill in the blank b495b908e03a06b_33
Total utilities	$fill in the blank b495b908e03a06b_34	$fill in the blank b495b908e03a06b_35	$fill in the blank b495b908e03a06b_36

Question Content Area

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

	May	June	July
Total flexible budget	$fill in the blank a8adf4027fe4043_1	$fill in the blank a8adf4027fe4043_2	$fill in the blank a8adf4027fe4043_3
Actual cost	fill in the blank a8adf4027fe4043_4	fill in the blank a8adf4027fe4043_5	fill in the blank a8adf4027fe4043_6
Excess of actual cost over budget	$fill in the blank a8adf4027fe4043_7	$fill in the blank a8adf4027fe4043_8	$fill in the blank a8adf4027fe4043_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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Hagerstown Company Machining Department Monthly Production Budget
Wages	$614,000
Utilities	36,000
Depreciation	61,000
Total	$711,000

	Amount Spent	Units Produced
May	$671,000		128,000
June	643,000		117,000
July	611,000		105,000

Wages per hour	$22.00
Utility cost per direct labor hour	$1.30
Direct labor hours per unit	0.20
Planned monthly unit production	140,000