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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 $536,000 40,000 67,000 $643,000 The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows: Amount Spent Depreciation Total Units Produced January February March $608,000 123,000 582,000 112,000 556,000 101,000 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 $643,000. 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 $16.00 $1.20 0.25 134,000 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 unit amounts carried out to hun decimal nlarae

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 $536,000 40,000 67,000 $643,000 The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows: Amount Spent Depreciation Total Units Produced January February March $608,000 123,000 582,000 112,000 556,000 101,000 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 $643,000. 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 $16.00 $1.20 0.25 134,000 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 unit amounts carried out to hun decimal nlarae

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter8: Budgeting
Section: Chapter Questions
Problem 3E: Static budget versus flexible budget The production supervisor of the Machining Department for...
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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 $536,000 40,000 67,000 $643,000 The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows: Amount Spent $608,000 582,000 556,000 Depreciation Total January February March Units Produced 123,000 112,000 101,000 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 $643,000. 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 $16.00 $1.20 0.25 134,000 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 renuired e ner unit amounts carried out to hun decimal nlaces
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 $536,000 40,000 67,000 $643,000 The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows: Amount Spent $608,000 582,000 556,000 Depreciation Total January February March Units Produced 123,000 112,000 101,000 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 $643,000. 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 $16.00 $1.20 0.25 134,000 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 renuired e ner unit amounts carried out to hun decimal nlaces
Planned monthly unit production 134,000 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 123,000 ✓ Units of production Wages Ubilities Depreciation Total 492,000 X 36,900 X X X Actual cost February 112,000 ✓ 448,000 X 33,600 X X X March 101,000 ✓ 404,000 X 30,300 X X b. Compare the flexible budget with the actual expenditures for the first three months. January February X X X 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. X X X X March X X X
Transcribed Image Text:Planned monthly unit production 134,000 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 123,000 ✓ Units of production Wages Ubilities Depreciation Total 492,000 X 36,900 X X X Actual cost February 112,000 ✓ 448,000 X 33,600 X X X March 101,000 ✓ 404,000 X 30,300 X X b. Compare the flexible budget with the actual expenditures for the first three months. January February X X X 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. X X X X March X X X
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