eBook Static Budget vs. Flexible Budget The production supervisor of the Painting Department for Whitley Company agreed to the following monthly static budget for the upcoming year: WHITLEY COMPANY Painting Department Monthly Production Budget Wages $548,000 Utilities 40,000 Depreciation 67,000 Total $655,000 The actual amount spent and the actual units produced in the first three months in the Painting Department were as follows: Amount Spent Units Produced January $618,000 67,000 February 592,000 61,000 March 566,000 55,000 The Painting Department supervisor has been very pleased with this performance, since actual expenditures have been less than the monthly budget. 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 Painting Department. Additional budget information for the Painting Department is as follows: Wages per hour $15.00 Utility cost per direct labor hour $1.10 Direct labor hours per unit 0.50 hrs. Planned unit production 73,000 units a. Prepare a flexible budget for the actual units produced for January, February, and March in the Painting Department. Assume depreciation is a fixed cost. Enter all amounts as positive numbers.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Static Budget vs. Flexible Budget
The production supervisor of the Painting Department for Whitley Company agreed to the following monthly static budget for the upcoming year:
| WHITLEY COMPANY Painting Department Monthly Production Budget |
|
| Wages | $548,000 |
| Utilities | 40,000 |
| 67,000 | |
| Total | $655,000 |
The actual amount spent and the actual units produced in the first three months in the Painting Department were as follows:
| Amount Spent | Units Produced | |||
| January | $618,000 | 67,000 | ||
| February | 592,000 | 61,000 | ||
| March | 566,000 | 55,000 |
The Painting Department supervisor has been very pleased with this performance, since actual expenditures have been less than the monthly budget. 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 Painting Department. Additional budget information for the Painting Department is as follows:
| Wages per hour | $15.00 |
| Utility cost per direct labor hour | $1.10 |
| Direct labor hours per unit | 0.50 hrs. |
| Planned unit production | 73,000 units |
a. Prepare a flexible budget for the actual units produced for January, February, and March in the Painting Department. Assume depreciation is a fixed cost. Enter all amounts as positive numbers. If
![**Flexible Budget Preparation and Analysis for Whitley Company Painting Department**
### Part A: Flexible Budget Preparation
**Objective:**
Prepare a flexible budget for actual units produced in January, February, and March, assuming depreciation is a fixed cost.
**Flexible Budget for Three Months Ending March 31:**
- **January:**
- Units of Production: 67,000
- Wages: $502,500
- Utilities: $36,850
- Depreciation: $67,000
- **Total: $606,350**
- **February:**
- Units of Production: 61,000
- Wages: $457,500
- Utilities: $33,550
- Depreciation: $67,000
- **Total: $558,050**
- **March:**
- Units of Production: 55,000
- Wages: $412,500
- Utilities: $30,250
- Depreciation: $67,000
- **Total: $509,750**
**Feedback:**
- For each level of production, display wages, utilities, and depreciation.
- Calculate total wages by multiplying units produced by hours per unit and wages per hour.
- Calculate total utilities by multiplying total hours of production by utility cost per hour.
### Part B: Budget vs. Actual Expense Comparison
**Task:**
Compare the flexible budget with actual expenditures for January, February, and March.
- **January:**
- Actual Cost: [To be filled]
- Total Flexible Budget: [Amount above]
- Excess of Actual Cost Over Budget: [To be filled]
- **February and March:** [Fields to be filled similarly]
**Analysis Questions:**
- **What does this comparison suggest?**
- Has the Painting Department performed better than originally thought? **No**
- Is the department spending more than expected? **Yes**
This exercise highlights the importance of flexible budgeting in evaluating departmental performance against financial expectations.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa84f4618-86b2-4a5b-a65b-3fceba435a29%2F740bed7d-33c8-4af1-803f-764a2b0c816f%2Fjpjczqq_processed.png&w=3840&q=75)
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
