Static Budget vs. Flexible Budget
The production supervisor of the Machining Department for Nell Company agreed to the following monthly static budget for the upcoming year:
Nell Company
Machining Department
Monthly Production Budget
Wages $1,199,000
Utilities 71,000
Depreciation 118,000
Total $1,388,000
The actual amount spent and the actual units produced in the first three months of 2014 in the Machining Department were as follows:
Amount Spent Units Produced
January $1,309,000 100,000
February 1,249,000 91,000
March 1,191,000 82,000
The Machining Department supervisor has been very pleased with this performance, since actual expenditures have been less than the monthly budget. 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 0.50
Planned monthly unit production 109,000

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a. Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume depreciation is a fixed cost. Enter all amounts as positive numbers. If required, use per unit amounts carried out to two decimal places.


Nell Company-Machining Department
Flexible Production Budget
For the Three Months Ending March 31, 2014
January
February
March
Units of production



Wages
$
$
$
Utilities



Depreciation



Total
$
$
$



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Partially Correct
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For each level of production, show wages, utilities, and depreciation.
Consider performance and spending.
Learning Objective 2, Learning Objective 4.