Question

Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed...

Static Budget versus Flexible Budget

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 Budget
Wages $264,000
Utilities 15,000
Depreciation 26,000
Total $305,000

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 $288,000 51,000
February 278,000 47,000
March 263,000 42,000

The Machining Department supervisor has been very pleased with this performance because actual expenditures for January–March have been significantly less than the monthly static budget of 305,000. 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 $19
Utility cost per direct labor hour $1.1
Direct labor hours per unit 0.25
Planned monthly unit production 56,000

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.

Niland Company
Machining Department Budget
For the Three Months Ending March 31
January February March
Units of production 51,000 47,000 42,000
$ $ $
Total $ $ $
Supporting calculations:
Units of production 51,000 47,000 42,000
Hours per unit x x x
Total hours of production
Wages per hour x $ x $ x $
Total wages $ $ $
Total hours of production
Utility costs per hour x $ x $ x $
Total utilities $ $ $

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

January February March
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.

Homework Answers

Answer #1
a Machining Department Budget
For the Three Months Ending March 31
January February March
Units of production 51,000 47,000 42,000
Wages 242250 223250 199500
Utilities 14025 12925 11550
Depreciation 26000 26000 26000
Total 282275 262175 237050
Supporting calculations:
Units of production 51,000 47,000 42,000
Hours per unit 0.25 0.25 0.25
Total hours of production 12750 11750 10500
Wages per hour 19 19 19
Total wages 242250 223250 199500
Total hours of production
Utility costs per hour 1.1 1.1 1.1
Total utilities 14025 12925 11550
b January February March
Total flexible budget 282275 262175 237050
Actual cost 288000 278000 263000
Excess of actual cost over budget -5725 -15825 -25950
The department is spending more than would be expected.
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Hagerstown Company agreed...
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 $189,000 Utilities 11,000 Depreciation 19,000 Total $219,000 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 $207,000 51,000 June 199,000 47,000 July 189,000 42,000 The Machining Department supervisor has...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed...
Static Budget versus Flexible Budget 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 Budget Wages $961,000 Utilities 76,000 Depreciation 125,000 Total $1,162,000 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 $1,098,000 126,000 February 1,045,000 114,000 March 1,002,000 103,000 The Machining Department supervisor has...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed...
Static Budget versus Flexible Budget 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 Budget Wages $412,000 Utilities 26,000 Depreciation 43,000 Total $481,000 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 $453,000 118,000 February 435,000 108,000 March 414,000 97,000 The Machining Department supervisor has...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Hagerstown Company agreed...
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 $467,000 Utilities 29,000 Depreciation 49,000 Total $545,000 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 $514,000 107,000 June 493,000 98,000 July 470,000 88,000 The Machining Department supervisor has...
The production supervisor of the Machining Department for Niland Company agreed to the following monthly static...
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 Budget Wages $486,000 Utilities 28,000 Depreciation 47,000 Total $561,000 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 $529,000    85,000    February 509,000 78,000 March 483,000 70,000 The Machining Department supervisor has been very pleased...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Hagerstown Company agreed...
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 $663,000 Utilities 31,000 Depreciation 53,000 Total $747,000 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 $704,000 128,000 June 673,000 117,000 July 639,000 105,000 The Machining Department supervisor has...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Hagerstown Company agreed...
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 $283,000 Utilities 17,000 Depreciation 28,000 Total $328,000 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 $309,000 61,000 June 297,000 56,000 July 281,000 50,000 The Machining Department supervisor has...
The production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static...
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 $2,250,000 Utilities 72,000 Depreciation 36,000 Total $2,358,000 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 $1,600,000 40,000 June 1,950,000 48,000 July 2,200,000 52,000 The Machining Department supervisor has been very pleased with this...
Direct Labor Cost Budget MatchPoint Racket Company manufactures two types of tennis rackets, the Junior and...
Direct Labor Cost Budget MatchPoint Racket Company manufactures two types of tennis rackets, the Junior and Pro Striker models. The production budget for March for the two rackets is as follows: Junior Pro Striker Production budget 9,300 units 21,300 units Both rackets are produced in two departments, Forming and Assembly. The direct labor hours required for each racket are estimated as follows: Forming Department Assembly Department Junior 0.25 hour per unit 0.5 hour per unit Pro Striker 0.3 hour per...
Preparing a Production Budget Patrick Inc. makes industrial solvents. In the first 4 months of the...
Preparing a Production Budget Patrick Inc. makes industrial solvents. In the first 4 months of the coming year, Patrick expects the following unit sales: January 41,000 February 38,000 March 50,000 April 51,000 Patrick's policy is to have 21% of next month's sales in ending inventory. On January 1, it is expected that there will be 4,350 drums of solvent on hand. Required: Prepare a production budget for the first quarter of the year. Show the number of drums that should...