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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 $347,000. 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: $15.00 $1.00 0.20 98,000 Wages per hour Utility cost per direct labor hour Direct labor hours per unit Planned monthly unit production 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. If required, use per unit amounts carried out to two decimal places. Celtic Company-Machining Department Flexible Production Budget For the Three Months Ending March 31 January February March Units of production Wages Utilities Depreciation Total

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 $347,000. 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: $15.00 $1.00 0.20 98,000 Wages per hour Utility cost per direct labor hour Direct labor hours per unit Planned monthly unit production 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. If required, use per unit amounts carried out to two decimal places. Celtic Company-Machining Department Flexible Production Budget For the Three Months Ending March 31 January February March Units of production Wages Utilities Depreciation Total

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Static Budget versus Flexible Budget The production supervisor of the Machining Department for Celtic Company agreed to the following monthly static budget for the upcoming year: Celtic Company Machining Department Monthly Production Budget Wages Utilities $294,000 20,000 33,000 Depreciation Total $347,000 The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows: Amount Spent $327,000 January February March Units Produced 90,000 82,000 74,000 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 $347,000. 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: 313,000 299,000
Transcribed Image Text:Static Budget versus Flexible Budget The production supervisor of the Machining Department for Celtic Company agreed to the following monthly static budget for the upcoming year: Celtic Company Machining Department Monthly Production Budget Wages Utilities $294,000 20,000 33,000 Depreciation Total $347,000 The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows: Amount Spent $327,000 January February March Units Produced 90,000 82,000 74,000 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 $347,000. 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: 313,000 299,000
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 $347,000. 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 Utility cost per direct labor hour Direct labor hours per unit Planned monthly unit production 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. If required, use per unit amounts carried out to two decimal places. Celtic Company-Machining Department Units of production Wages Utilities $15.00 Flexible Production Budget For the Three Months Ending March 31 Depreciation $1.00 0.20 98,000 Total January February March b. Compare the flexible budget with the actual expenditures for the first three months. ) February January Actual cost Total flexible budget Excess of actual cost over budget What does this comparison suggest? The Machining Department has performed better than originally thought. The department is spending more than would be expected. March
Transcribed Image Text: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 $347,000. 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 Utility cost per direct labor hour Direct labor hours per unit Planned monthly unit production 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. If required, use per unit amounts carried out to two decimal places. Celtic Company-Machining Department Units of production Wages Utilities $15.00 Flexible Production Budget For the Three Months Ending March 31 Depreciation $1.00 0.20 98,000 Total January February March b. Compare the flexible budget with the actual expenditures for the first three months. ) February January Actual cost Total flexible budget Excess of actual cost over budget What does this comparison suggest? The Machining Department has performed better than originally thought. The department is spending more than would be expected. March
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