The production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static budget for the upcoming year: Hagerstown Company Machining Department Monthly Production Budget Wages $614,000 Utilities 36,000 Depreciation 61,000 Total $711,000 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 May $671,000 128,000 June 643,000 117,000 July 611,000 105,000 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 711,000. 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 $22.00 Utility cost per direct labor hour $1.30 Direct labor hours per unit 0.20 Planned monthly unit production 140,000 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. Hagerstown CompanyMachining Department BudgetFor the Three Months Ending July 31 May June July Units of production 128,000 117,000 105,000 $Wages $Wages $Wages Utilities Utilities Utilities Depreciation Depreciation Depreciation Total $fill in the blank b495b908e03a06b_13 $fill in the blank b495b908e03a06b_14 $fill in the blank b495b908e03a06b_15 Supporting calculations: Units of production 128,000 117,000 105,000 Hours per unit x fill in the blank b495b908e03a06b_16 x fill in the blank b495b908e03a06b_17 x fill in the blank b495b908e03a06b_18 Total hours of production fill in the blank b495b908e03a06b_19 fill in the blank b495b908e03a06b_20 fill in the blank b495b908e03a06b_21 Wages per hour x $fill in the blank b495b908e03a06b_22 x $fill in the blan
The production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static budget for the upcoming year: Hagerstown Company Machining Department Monthly Production Budget Wages $614,000 Utilities 36,000 Depreciation 61,000 Total $711,000 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 May $671,000 128,000 June 643,000 117,000 July 611,000 105,000 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 711,000. 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 $22.00 Utility cost per direct labor hour $1.30 Direct labor hours per unit 0.20 Planned monthly unit production 140,000 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. Hagerstown CompanyMachining Department BudgetFor the Three Months Ending July 31 May June July Units of production 128,000 117,000 105,000 $Wages $Wages $Wages Utilities Utilities Utilities Depreciation Depreciation Depreciation Total $fill in the blank b495b908e03a06b_13 $fill in the blank b495b908e03a06b_14 $fill in the blank b495b908e03a06b_15 Supporting calculations: Units of production 128,000 117,000 105,000 Hours per unit x fill in the blank b495b908e03a06b_16 x fill in the blank b495b908e03a06b_17 x fill in the blank b495b908e03a06b_18 Total hours of production fill in the blank b495b908e03a06b_19 fill in the blank b495b908e03a06b_20 fill in the blank b495b908e03a06b_21 Wages per hour x $fill in the blank b495b908e03a06b_22 x $fill in the blan
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
The production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static budget for the upcoming year:
| Hagerstown Company Machining Department Monthly Production Budget |
|
| Wages | $614,000 |
| Utilities | 36,000 |
| 61,000 | |
| Total | $711,000 |
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 | |||
| May | $671,000 | 128,000 | ||
| June | 643,000 | 117,000 | ||
| July | 611,000 | 105,000 |
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 711,000. 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 | $22.00 |
| Utility cost per direct labor hour | $1.30 |
| Direct labor hours per unit | 0.20 |
| Planned monthly unit production | 140,000 |
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.
| May | June | July | |
| Units of production | 128,000 | 117,000 | 105,000 |
|
|
$Wages | $Wages | $Wages |
|
|
Utilities | Utilities | Utilities |
|
|
Depreciation | Depreciation | Depreciation |
| Total | $fill in the blank b495b908e03a06b_13 | $fill in the blank b495b908e03a06b_14 | $fill in the blank b495b908e03a06b_15 |
| Supporting calculations: | |||
| Units of production | 128,000 | 117,000 | 105,000 |
| Hours per unit | x fill in the blank b495b908e03a06b_16 | x fill in the blank b495b908e03a06b_17 | x fill in the blank b495b908e03a06b_18 |
| Total hours of production | fill in the blank b495b908e03a06b_19 | fill in the blank b495b908e03a06b_20 | fill in the blank b495b908e03a06b_21 |
| Wages per hour | x $fill in the blank b495b908e03a06b_22 | x $fill in the blank b495b908e03a06b_23 | x $fill in the blank b495b908e03a06b_24 |
| Total wages | $fill in the blank b495b908e03a06b_25 | $fill in the blank b495b908e03a06b_26 | $fill in the blank b495b908e03a06b_27 |
| Total hours of production | fill in the blank b495b908e03a06b_28 | fill in the blank b495b908e03a06b_29 | fill in the blank b495b908e03a06b_30 |
| Utility costs per hour | x $fill in the blank b495b908e03a06b_31 | x $fill in the blank b495b908e03a06b_32 | x $fill in the blank b495b908e03a06b_33 |
| Total utilities | $fill in the blank b495b908e03a06b_34 | $fill in the blank b495b908e03a06b_35 | $fill in the blank b495b908e03a06b_36 |
Question Content Area
b. Compare the flexible budget with the actual expenditures for the first three months.
| May | June | July | |
| Total flexible budget | $fill in the blank a8adf4027fe4043_1 | $fill in the blank a8adf4027fe4043_2 | $fill in the blank a8adf4027fe4043_3 |
| Actual cost | fill in the blank a8adf4027fe4043_4 | fill in the blank a8adf4027fe4043_5 | fill in the blank a8adf4027fe4043_6 |
| Excess of actual cost over budget | $fill in the blank a8adf4027fe4043_7 | $fill in the blank a8adf4027fe4043_8 | $fill in the blank a8adf4027fe4043_9 |
What does this comparison suggest?
| The Machining Department has performed better than originally thought. |
|
| The department is spending more than would be expected. |
|
Expert Solution
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