The production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static budget for the upcoming year: Line Item Description Amount Wages $481,000 Utilities 27,000 Depreciation 46,000 Total $554,000 The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows: Month Amount Spent Units Produced May $522,000 105,000 June 496,000 95,000 July 475,000 86,000 The Machining Department supervisor has been very pleased with this performance because actual expenditures for May–July have been significantly less than the monthly static budget of 554,000. 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: Line Item Description Amount Wages per hour $21.00 Utility cost per direct labor hour $1.20 Direct labor hours per unit 0.20 Planned monthly unit production 114,000 Question Content Area a. Prepare a flexible budget for the actual units produced for May, June, and July in the Machining Department. Assume depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places. Line Item Description May June July Units of production 105,000 95,000 86,000 AdvertisingRentResearch and developmentSuppliesWages $- Select - $- Select - $- Select - AdvertisingRentResearch and developmentSuppliesUtilities - Select - - Select - - Select - AdvertisingDepreciationRentResearch and developmentSupplies - Select - - Select - - Select - Total $Total $Total $Total Supporting calculations: Units of production 105,000 95,000 86,000 Hours per unit x Hours per unit x Hours per unit x Hours per unit Total hours of production Total hours of production Total hours of production Total hours of production Wages per hour x $Wages per hour x $Wages per hour x $Wages per hour Total wages $Total wages $Total wages $Total wages Total hours of production Total hours of production Total hours of production Total hours of production Utility costs per hour x $Utility costs per hour x $Utility costs per hour x $Utility costs per hour Total utilities $Total utilities $Total utilities $Total utilities Question Content Area b. Compare the flexible budget with the actual expenditures for the first three months. Line Item Description May June July Total flexible budget fill in the blank 1 of 9$ fill in the blank 2 of 9$ fill in the blank 3 of 9$ Actual cost fill in the blank 4 of 9 fill in the blank 5 of 9 fill in the blank 6 of 9 Excess of actual cost over budget fill in the blank 7 of 9$ fill in the blank 8 of 9$ fill in the blank 9 of 9$ What does this comparison suggest? The Machining Department has performed better than originally thought. YesNo The department is spending more than would be expected. YesNo

The production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static budget for the upcoming year: Line Item Description Amount Wages $481,000 Utilities 27,000 Depreciation 46,000 Total $554,000 The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows: Month Amount Spent Units Produced May $522,000 105,000 June 496,000 95,000 July 475,000 86,000 The Machining Department supervisor has been very pleased with this performance because actual expenditures for May–July have been significantly less than the monthly static budget of 554,000. 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: Line Item Description Amount Wages per hour $21.00 Utility cost per direct labor hour $1.20 Direct labor hours per unit 0.20 Planned monthly unit production 114,000 Question Content Area a. Prepare a flexible budget for the actual units produced for May, June, and July in the Machining Department. Assume depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places. Line Item Description May June July Units of production 105,000 95,000 86,000 AdvertisingRentResearch and developmentSuppliesWages $- Select - $- Select - $- Select - AdvertisingRentResearch and developmentSuppliesUtilities - Select - - Select - - Select - AdvertisingDepreciationRentResearch and developmentSupplies - Select - - Select - - Select - Total $Total $Total $Total Supporting calculations: Units of production 105,000 95,000 86,000 Hours per unit x Hours per unit x Hours per unit x Hours per unit Total hours of production Total hours of production Total hours of production Total hours of production Wages per hour x $Wages per hour x $Wages per hour x $Wages per hour Total wages $Total wages $Total wages $Total wages Total hours of production Total hours of production Total hours of production Total hours of production Utility costs per hour x $Utility costs per hour x $Utility costs per hour x $Utility costs per hour Total utilities $Total utilities $Total utilities $Total utilities Question Content Area b. Compare the flexible budget with the actual expenditures for the first three months. Line Item Description May June July Total flexible budget fill in the blank 1 of 9$ fill in the blank 2 of 9$ fill in the blank 3 of 9$ Actual cost fill in the blank 4 of 9 fill in the blank 5 of 9 fill in the blank 6 of 9 Excess of actual cost over budget fill in the blank 7 of 9$ fill in the blank 8 of 9$ fill in the blank 9 of 9$ What does this comparison suggest? The Machining Department has performed better than originally thought. YesNo The department is spending more than would be expected. YesNo

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 3BE: Activity-based costing: factory overhead costs The total factory overhead for Bardot Marine Company...

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Line Item Description	Amount
Wages	$481,000
Utilities	27,000
Depreciation	46,000
Total	$554,000

Month	Amount Spent	Units Produced
May	$522,000	105,000
June	496,000	95,000
July	475,000	86,000

Line Item Description	Amount
Wages per hour	$21.00
Utility cost per direct labor hour	$1.20
Direct labor hours per unit	0.20
Planned monthly unit production	114,000

Question Content Area

a. Prepare a flexible budget for the actual units produced for May, June, and July in the Machining Department. Assume depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places.

Line Item Description	May	June	July
Units of production	105,000	95,000	86,000
AdvertisingRentResearch and developmentSuppliesWages	$- Select -	$- Select -	$- Select -
AdvertisingRentResearch and developmentSuppliesUtilities	- Select -	- Select -	- Select -
AdvertisingDepreciationRentResearch and developmentSupplies	- Select -	- Select -	- Select -
Total	$Total	$Total	$Total
Supporting calculations:
Units of production	105,000	95,000	86,000
Hours per unit	x Hours per unit	x Hours per unit	x Hours per unit
Total hours of production	Total hours of production	Total hours of production	Total hours of production
Wages per hour	x $Wages per hour	x $Wages per hour	x $Wages per hour
Total wages	$Total wages	$Total wages	$Total wages
Total hours of production	Total hours of production	Total hours of production	Total hours of production
Utility costs per hour	x $Utility costs per hour	x $Utility costs per hour	x $Utility costs per hour
Total utilities	$Total utilities	$Total utilities	$Total utilities

Question Content Area

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

Line Item Description	May	June	July
Total flexible budget	fill in the blank 1 of 9$	fill in the blank 2 of 9$	fill in the blank 3 of 9$
Actual cost	fill in the blank 4 of 9	fill in the blank 5 of 9	fill in the blank 6 of 9
Excess of actual cost over budget	fill in the blank 7 of 9$	fill in the blank 8 of 9$	fill in the blank 9 of 9$

What does this comparison suggest?

The Machining Department has performed better than originally thought.

YesNo

The department is spending more than would be expected.

YesNo

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