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 $1,056,000 Utilities 85,800 Depreciation 42,000 Total $1,183,800 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 $994,500 68,000 February 1,078,500 76,000 March 1,174,900 84,000 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 $1,183,800. 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 $16.00 Utility cost per direct labor hour $1.30 Direct labor hours per unit 0.75 Planned monthly unit production 88,000 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. 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 fill in the blank a48ee7068025fc3_1 fill in the blank a48ee7068025fc3_2 fill in the blank a48ee7068025fc3_3 Wages $fill in the blank a48ee7068025fc3_4 $fill in the blank a48ee7068025fc3_5 $fill in the blank a48ee7068025fc3_6 Utilities fill in the blank a48ee7068025fc3_7 fill in the blank a48ee7068025fc3_8 fill in the blank a48ee7068025fc3_9 Depreciation fill in the blank a48ee7068025fc3_10 fill in the blank a48ee7068025fc3_11 fill in the blank a48ee7068025fc3_12 Total $fill in the blank a48ee7068025fc3_13 $fill in the blank a48ee7068025fc3_14 $fill in the blank a48ee7068025fc3_15 b. Compare the flexible budget with the actual expenditures for the first three months. January February March Actual cost $fill in the blank d57eb9004fbdfed_1 $fill in the blank d57eb9004fbdfed_2 $fill in the blank d57eb9004fbdfed_3 Total flexible budget fill in the blank d57eb9004fbdfed_4 fill in the blank d57eb9004fbdfed_5 fill in the blank d57eb9004fbdfed_6 Excess of actual cost over budget $fill in the blank d57eb9004fbdfed_7 $fill in the blank d57eb9004fbdfed_8 $fill in the blank d57eb9004fbdfed_9 What does this comparison suggest? The Machining Department has performed better than originally thought. The department is spending more than would be expected.

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 $1,056,000 Utilities 85,800 Depreciation 42,000 Total $1,183,800 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 $994,500 68,000 February 1,078,500 76,000 March 1,174,900 84,000 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 $1,183,800. 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 $16.00 Utility cost per direct labor hour $1.30 Direct labor hours per unit 0.75 Planned monthly unit production 88,000 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. 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 fill in the blank a48ee7068025fc3_1 fill in the blank a48ee7068025fc3_2 fill in the blank a48ee7068025fc3_3 Wages $fill in the blank a48ee7068025fc3_4 $fill in the blank a48ee7068025fc3_5 $fill in the blank a48ee7068025fc3_6 Utilities fill in the blank a48ee7068025fc3_7 fill in the blank a48ee7068025fc3_8 fill in the blank a48ee7068025fc3_9 Depreciation fill in the blank a48ee7068025fc3_10 fill in the blank a48ee7068025fc3_11 fill in the blank a48ee7068025fc3_12 Total $fill in the blank a48ee7068025fc3_13 $fill in the blank a48ee7068025fc3_14 $fill in the blank a48ee7068025fc3_15 b. Compare the flexible budget with the actual expenditures for the first three months. January February March Actual cost $fill in the blank d57eb9004fbdfed_1 $fill in the blank d57eb9004fbdfed_2 $fill in the blank d57eb9004fbdfed_3 Total flexible budget fill in the blank d57eb9004fbdfed_4 fill in the blank d57eb9004fbdfed_5 fill in the blank d57eb9004fbdfed_6 Excess of actual cost over budget $fill in the blank d57eb9004fbdfed_7 $fill in the blank d57eb9004fbdfed_8 $fill in the blank d57eb9004fbdfed_9 What does this comparison suggest? The Machining Department has performed better than originally thought. The department is spending more than would be expected.

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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Question

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	$1,056,000
Utilities	85,800
Depreciation	42,000
Total	$1,183,800

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	$994,500		68,000
February	1,078,500		76,000
March	1,174,900		84,000

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 $1,183,800. 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	$16.00
Utility cost per direct labor hour	$1.30
Direct labor hours per unit	0.75
Planned monthly unit production	88,000

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. 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	fill in the blank a48ee7068025fc3_1	fill in the blank a48ee7068025fc3_2	fill in the blank a48ee7068025fc3_3
Wages	$fill in the blank a48ee7068025fc3_4	$fill in the blank a48ee7068025fc3_5	$fill in the blank a48ee7068025fc3_6
Utilities	fill in the blank a48ee7068025fc3_7	fill in the blank a48ee7068025fc3_8	fill in the blank a48ee7068025fc3_9
Depreciation	fill in the blank a48ee7068025fc3_10	fill in the blank a48ee7068025fc3_11	fill in the blank a48ee7068025fc3_12
Total	$fill in the blank a48ee7068025fc3_13	$fill in the blank a48ee7068025fc3_14	$fill in the blank a48ee7068025fc3_15

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

	January	February	March
Actual cost	$fill in the blank d57eb9004fbdfed_1	$fill in the blank d57eb9004fbdfed_2	$fill in the blank d57eb9004fbdfed_3
Total flexible budget	fill in the blank d57eb9004fbdfed_4	fill in the blank d57eb9004fbdfed_5	fill in the blank d57eb9004fbdfed_6
Excess of actual cost over budget	$fill in the blank d57eb9004fbdfed_7	$fill in the blank d57eb9004fbdfed_8	$fill in the blank d57eb9004fbdfed_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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