The production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static budget for the upcoming year:The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows:Amount Spent Units ProducedMay $1,600,000 40,000June 1,950,000 48,000July 2,200,000 52,000The Machining Department supervisor has been very pleased with this performance because actual expenditures for May-July have been significantly lessthan the monthly static budget of $2, 358,000. 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 asfollows:Wages per hour $25.00Utility cost per direct labor hour $0.80Direct labor hours per unit 1.5Planned monthly unit production 60,000a. Prepare a flexible budget for the actual units produced for May, June, and July in the Machining Department. Assume depreciation is a fixed cost.b. Compare the flexible budget with the actual expenditures for the first three months. What does this comparison suggest?

Detailed explanation:Given data: Wages per hour: $25.00Utility cost per direct labor hour:…

Answered: The production supervisor of the…

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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The Chicago power plant that services all manufacturing departments of MidWestEngineering has a budget for the coming year. This budget has been expressed in thefollowing monthly terms:Manufacturing Needed at Practical Capacity Average Expected MonthlyDepartment Production Level (Kilowatt- Usage (Kilowatt-Hours)Rockford 10,000 8,000Peoria 20,000 9,000Hammond 12,000 7,000Kankakee 8,000 6,000Total 50,000 30,000The expected monthly costs for operating the power plant during the budget year are $15,000:$6,000 variable and $9,000 fixed.Required:1. Assume that a single cost pool is…
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