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he 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	$398,000
Utilities	18,000
Depreciation	30,000
Total	$446,000

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	$420,000		83,000
June	398,000		75,000
July	381,000		68,000

The Machining Department supervisor has been very pleased with this performance because actual expenditures for MayJuly have been significantly less than the monthly static budget of 446,000. 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	$1.00
Direct labor hours per unit	0.20
Planned monthly unit production	90,000

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	83,000	75,000	68,000
	$fill in the blank fda94202cff6031_2	$fill in the blank fda94202cff6031_3	$fill in the blank fda94202cff6031_4
	fill in the blank fda94202cff6031_6	fill in the blank fda94202cff6031_7	fill in the blank fda94202cff6031_8
	fill in the blank fda94202cff6031_10	fill in the blank fda94202cff6031_11	fill in the blank fda94202cff6031_12
Total	$fill in the blank fda94202cff6031_13	$fill in the blank fda94202cff6031_14	$fill in the blank fda94202cff6031_15
Supporting calculations:
Units of production	83,000	75,000	68,000
Hours per unit	x fill in the blank fda94202cff6031_16	x fill in the blank fda94202cff6031_17	x fill in the blank fda94202cff6031_18
Total hours of production	fill in the blank fda94202cff6031_19	fill in the blank fda94202cff6031_20	fill in the blank fda94202cff6031_21
Wages per hour	x $fill in the blank fda94202cff6031_22	x $fill in the blank fda94202cff6031_23	x $fill in the blank fda94202cff6031_24
Total wages	$fill in the blank fda94202cff6031_25	$fill in the blank fda94202cff6031_26	$fill in the blank fda94202cff6031_27
Total hours of production	fill in the blank fda94202cff6031_28	fill in the blank fda94202cff6031_29	fill in the blank fda94202cff6031_30
Utility costs per hour	x $fill in the blank fda94202cff6031_31	x $fill in the blank fda94202cff6031_32	x $fill in the blank fda94202cff6031_33
Total utilities	$fill in the blank fda94202cff6031_34	$fill in the blank fda94202cff6031_35	$fill in the blank fda94202cff6031_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 c0af800bcfec05a_1	$fill in the blank c0af800bcfec05a_2	$fill in the blank c0af800bcfec05a_3
Actual cost	fill in the blank c0af800bcfec05a_4	fill in the blank c0af800bcfec05a_5	fill in the blank c0af800bcfec05a_6
Excess of actual cost over budget	$fill in the blank c0af800bcfec05a_7	$fill in the blank c0af800bcfec05a_8	$fill in the blank c0af800bcfec05a_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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