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 CompanyMachining DepartmentMonthly Production Budget Wages $385,000 Utilities 20,000 Depreciation 34,000 Total $439,000 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 $414,000 93,000 February 392,000 84,000 March 375,000 76,000 The Machining Department supervisor has been very pleased with this performance because actual expenditures for January–March have been less than the monthly static budget of $439,000. 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 $19.00 Utility cost per direct labor hour $1.00 Direct labor hours per unit 0.20 Planned monthly unit production 101,000 a.Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume that depreciation is a fixed cost. Enter all amounts as positive numbers. If required, use per unit amounts carried out to two decimal places. Niland Company-Machining Department Flexible Production Budget For the Three Months Ending March 31 January February March Units of production fill in the blank bba19df7cfcc076_1 fill in the blank bba19df7cfcc076_2 fill in the blank bba19df7cfcc076_3 Wages $fill in the blank bba19df7cfcc076_4 $fill in the blank bba19df7cfcc076_5 $fill in the blank bba19df7cfcc076_6 Utilities fill in the blank bba19df7cfcc076_7 fill in the blank bba19df7cfcc076_8 fill in the blank bba19df7cfcc076_9 Depreciation fill in the blank bba19df7cfcc076_10 fill in the blank bba19df7cfcc076_11 fill in the blank bba19df7cfcc076_12 Total $fill in the blank bba19df7cfcc076_13 $fill in the blank bba19df7cfcc076_14 $fill in the blank bba19df7cfcc076_15 b.Compare the flexible budget with the actual expenditures for the first three months. January February March Total flexible budget $fill in the blank 430dc405b056fd7_1 $fill in the blank 430dc405b056fd7_2 $fill in the blank 430dc405b056fd7_3 Actual cost fill in the blank 430dc405b056fd7_4 fill in the blank 430dc405b056fd7_5 fill in the blank 430dc405b056fd7_6 Excess of actual cost over budget $fill in the blank 430dc405b056fd7_7 $fill in the blank 430dc405b056fd7_8 $fill in the blank 430dc405b056fd7_9 What does this comparison suggest? The Machining Department has performed better than originally thought. The department is spending more than would be expected.

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...

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	$385,000
Utilities	20,000
Depreciation	34,000
Total	$439,000

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	$414,000		93,000
February	392,000		84,000
March	375,000		76,000

The Machining Department supervisor has been very pleased with this performance because actual expenditures for January–March have been less than the monthly static budget of $439,000. 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	$19.00
Utility cost per direct labor hour	$1.00
Direct labor hours per unit	0.20
Planned monthly unit production	101,000

a.Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume that depreciation is a fixed cost. Enter all amounts as positive numbers. If required, use per unit amounts carried out to two decimal places.

Niland Company-Machining Department
Flexible Production Budget
For the Three Months Ending March 31
	January	February	March
Units of production	fill in the blank bba19df7cfcc076_1	fill in the blank bba19df7cfcc076_2	fill in the blank bba19df7cfcc076_3
Wages	$fill in the blank bba19df7cfcc076_4	$fill in the blank bba19df7cfcc076_5	$fill in the blank bba19df7cfcc076_6
Utilities	fill in the blank bba19df7cfcc076_7	fill in the blank bba19df7cfcc076_8	fill in the blank bba19df7cfcc076_9
Depreciation	fill in the blank bba19df7cfcc076_10	fill in the blank bba19df7cfcc076_11	fill in the blank bba19df7cfcc076_12
Total	$fill in the blank bba19df7cfcc076_13	$fill in the blank bba19df7cfcc076_14	$fill in the blank bba19df7cfcc076_15

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

	January	February	March
Total flexible budget	$fill in the blank 430dc405b056fd7_1	$fill in the blank 430dc405b056fd7_2	$fill in the blank 430dc405b056fd7_3
Actual cost	fill in the blank 430dc405b056fd7_4	fill in the blank 430dc405b056fd7_5	fill in the blank 430dc405b056fd7_6
Excess of actual cost over budget	$fill in the blank 430dc405b056fd7_7	$fill in the blank 430dc405b056fd7_8	$fill in the blank 430dc405b056fd7_9

What does this comparison suggest?

The Machining Department has performed better than originally thought.
The department is spending more than would be expected.

Jun 09, 2022

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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...

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