Question

Static Budget versus Flexible Budget The production supervisor of the Machining Department for Hagerstown Company agreed to the following month Hagerstown Company Machining Department Monthly Production Budget Wages $217,000 Utilities 15,000 Depreciation 26,000 Total $258,000 The actual amount spent and the actual units produced in the first three months in the Machining Department were Amount Spent Units Produced May $244,000 71,000 June 231,000 64,000 July 222,000 58,000 The Machining Department supervisor has been very pleased with this performance because actual expenditures for budget of 258,000. However, the plant manager believes that the budget should not remain fixed for every month bu in the Machining Department. Additional budget information for the Machining Department is as follows: Wages per hour Utility cost per direct labor hour Direct labor hours per unit Planned monthly unit production $14.00 $1.00 0.20 77,000 Prerres flavihle hudnet for the actual units nonduced for May June and buy in the Machining Department Assum

Answer 1

July 58000 Solution (a) Files Flexible Budget L a may June units of Production 71000 64000 variable Costs, wages $198,800 $177,200 $ 162,400 utilities $14200 $12500 $11600 Total variable cost $213,000 $192,000 $174,000 Fixed cost 26000 26000 26000 ( Repreciation) Total Cost $239,000 $218,000 $200,000 units of Poodor ТА 71000 64000 Supporting Calculation. - hay 1 June 58000 hours rerunt 100.20 0.20 0. 20 Total hours of 14,200 12,800 11600 production Wages per hour $11 1x$14 Total wages $198,800 $179,200 $162, 400 Total hours of of 14200 production 12800 11600 rity Gst Perhoux x $1 1x $1 1x$1 Total utilities $14,200 $12800 $ 11600 w
Ch
Solution (6) for the diture Comparison of Ilexible budge with the actual Expenditure to first three months. Мотум 1 % Total Flexible budget | 239,000 | 218,000 200,000 Actual Cost 244,ooo 1231,000 222,000 113000 22ooo Excess at actual Cost over budgeted 5000