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 $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 performance because actual expenditures for May–July have been significantly less than the monthly static budget of $2,358,000. 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 $25.00 Utility cost per direct labor hour $0.80 Direct labor hours per unit 1.5 Planned monthly unit production 60,000 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 40,000 48,000 52,000 $Supplies $Supplies $Supplies - Select - - Select - - Select - - Select - - Select - - Select - Total $fill in the blank 157c7b022fa2062_13 $fill in the blank 157c7b022fa2062_14 $fill in the blank 157c7b022fa2062_15 Supporting calculations: Units of production 40,000 48,000 52,000 Hours per unit x fill in the blank 157c7b022fa2062_16 x fill in the blank 157c7b022fa2062_17 x fill in the blank 157c7b022fa2062_18 Total hours of production fill in the blank 157c7b022fa2062_19 fill in the blank 157c7b022fa2062_20 fill in the blank 157c7b022fa2062_21 Wages per hour x $fill in the blank 157c7b022fa2062_22 x $fill in the blank 157c7b022fa2062_23 x $fill in the blank 157c7b022fa2062_24 Total wages $fill in the blank 157c7b022fa2062_25 $fill in the blank 157c7b022fa2062_26 $fill in the blank 157c7b022fa2062_27 Total hours of production fill in the blank 157c7b022fa2062_28 fill in the blank 157c7b022fa2062_29 fill in the blank 157c7b022fa2062_30 Utility costs per hour x $fill in the blank 157c7b022fa2062_31 x $fill in the blank 157c7b022fa2062_32 x $fill in the blank 157c7b022fa2062_33 Total utilities $fill in the blank 157c7b022fa2062_34 $fill in the blank 157c7b022fa2062_35 $fill in the blank 157c7b022fa2062_36 b. Compare the flexible budget with the actual expenditures for the first three months.

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 $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 performance because actual expenditures for May–July have been significantly less than the monthly static budget of $2,358,000. 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 $25.00 Utility cost per direct labor hour $0.80 Direct labor hours per unit 1.5 Planned monthly unit production 60,000 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 40,000 48,000 52,000 $Supplies $Supplies $Supplies - Select - - Select - - Select - - Select - - Select - - Select - Total $fill in the blank 157c7b022fa2062_13 $fill in the blank 157c7b022fa2062_14 $fill in the blank 157c7b022fa2062_15 Supporting calculations: Units of production 40,000 48,000 52,000 Hours per unit x fill in the blank 157c7b022fa2062_16 x fill in the blank 157c7b022fa2062_17 x fill in the blank 157c7b022fa2062_18 Total hours of production fill in the blank 157c7b022fa2062_19 fill in the blank 157c7b022fa2062_20 fill in the blank 157c7b022fa2062_21 Wages per hour x $fill in the blank 157c7b022fa2062_22 x $fill in the blank 157c7b022fa2062_23 x $fill in the blank 157c7b022fa2062_24 Total wages $fill in the blank 157c7b022fa2062_25 $fill in the blank 157c7b022fa2062_26 $fill in the blank 157c7b022fa2062_27 Total hours of production fill in the blank 157c7b022fa2062_28 fill in the blank 157c7b022fa2062_29 fill in the blank 157c7b022fa2062_30 Utility costs per hour x $fill in the blank 157c7b022fa2062_31 x $fill in the blank 157c7b022fa2062_32 x $fill in the blank 157c7b022fa2062_33 Total utilities $fill in the blank 157c7b022fa2062_34 $fill in the blank 157c7b022fa2062_35 $fill in the blank 157c7b022fa2062_36 b. Compare the flexible budget with the actual expenditures for the first three months.

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	$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 performance because actual expenditures for May–July have been significantly less than the monthly static budget of $2,358,000. 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	$25.00
Utility cost per direct labor hour	$0.80
Direct labor hours per unit	1.5
Planned monthly unit production	60,000

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	40,000	48,000	52,000
	$Supplies	$Supplies	$Supplies
	- Select -	- Select -	- Select -
	- Select -	- Select -	- Select -
Total	$fill in the blank 157c7b022fa2062_13	$fill in the blank 157c7b022fa2062_14	$fill in the blank 157c7b022fa2062_15
Supporting calculations:
Units of production	40,000	48,000	52,000
Hours per unit	x fill in the blank 157c7b022fa2062_16	x fill in the blank 157c7b022fa2062_17	x fill in the blank 157c7b022fa2062_18
Total hours of production	fill in the blank 157c7b022fa2062_19	fill in the blank 157c7b022fa2062_20	fill in the blank 157c7b022fa2062_21
Wages per hour	x $fill in the blank 157c7b022fa2062_22	x $fill in the blank 157c7b022fa2062_23	x $fill in the blank 157c7b022fa2062_24
Total wages	$fill in the blank 157c7b022fa2062_25	$fill in the blank 157c7b022fa2062_26	$fill in the blank 157c7b022fa2062_27
Total hours of production	fill in the blank 157c7b022fa2062_28	fill in the blank 157c7b022fa2062_29	fill in the blank 157c7b022fa2062_30
Utility costs per hour	x $fill in the blank 157c7b022fa2062_31	x $fill in the blank 157c7b022fa2062_32	x $fill in the blank 157c7b022fa2062_33
Total utilities	$fill in the blank 157c7b022fa2062_34	$fill in the blank 157c7b022fa2062_35	$fill in the blank 157c7b022fa2062_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 dc364dff3feffd0_1	$fill in the blank dc364dff3feffd0_2	$fill in the blank dc364dff3feffd0_3
Actual cost	fill in the blank dc364dff3feffd0_4	fill in the blank dc364dff3feffd0_5	fill in the blank dc364dff3feffd0_6
Excess of actual cost over budget	$fill in the blank dc364dff3feffd0_7	$fill in the blank dc364dff3feffd0_8	$fill in the blank dc364dff3feffd0_9

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