Question

In: Accounting

Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed...

Static Budget versus Flexible Budget

The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year:

Niland Company
Machining Department
Monthly Production Budget
Wages $1,396,000
Utilities 80,000
Depreciation 133,000
Total $1,609,000

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
January $1,517,000 122,000
February 1,447,000 111,000
March 1,380,000 100,000

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 $1,609,000. 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 $21.00
Utility cost per direct labor hour $1.20
Direct labor hours per unit 0.50
Planned monthly unit production 133,000

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.

Niland Company-Machining Department
Flexible Production Budget
For the Three Months Ending March 31
January February March
Units of production
Wages $ $ $
Utilities
Depreciation
Total $ $ $

Feedback

For each level of production, show wages, utilities, and depreciation.

Consider performance and spending.

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

January February March
Total flexible budget $ $ $
Actual cost
Excess of actual cost over budget $ $ $

What does this comparison suggest?

The Machining Department has performed better than originally thought. No
The department is spending more than would be expected. Yes

Solutions

Expert Solution

  • All working forms part of the answer
  • Requirement ‘a’

Niland Company-Machining Department

Flexible Production Budget

For the Three Months Ending March 31

January

February

March

Units of production

                           122,000

                111,000

                     100,000

Wages

$                 1,281,000.00

$      1,165,500.00

$           1,050,000.00

Utilities

$                     73,200.00

$           66,600.00

$               60,000.00

Depreciation

$                   133,000.00

$         133,000.00

$             133,000.00

Total

$                 1,487,200.00

$      1,365,100.00

$           1,243,000.00

---Working for above

Niland Company-Machining Department

Flexible Production Budget

For the Three Months Ending March 31

January

February

March

Units of production

122000

111000

100000

Wages [Units x labor hours per unit x wages per hour]

=+(122000*0.5*21)

=+(111000*0.5*21)

=+(100000*0.5*21)

Utilities [ Units x labor hours per unit x $1.2]

=122000*0.5*1.2

=111000*0.5*1.2

=100000*0.5*1.2

Depreciation

133000

133000

133000

Total

Total

Total

Total

  • Requirement ‘b’

January

February

March

Total flexible budget

$                 1,487,200.00

$      1,365,100.00

$           1,243,000.00

Actual cost

$                 1,517,000.00

$      1,447,000.00

$           1,380,000.00

Excess of actual cost over budget

$                     29,800.00

$           81,900.00

$             137,000.00

---Rest already filled in by you correctly.


Related Solutions

Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year: Niland Company Machining Department Monthly Production Budget Wages $1,125,000 Utilities 90,000 Depreciation 50,000 Total $1,265,000 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 January $1,100,000 80,000 February 1,200,000 90,000 March 1,250,000 95,000 The Machining Department supervisor has...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year: Niland Company Machining Department Monthly Production Budget Wages $315,000 Utilities 17,000 Depreciation 28,000 Total $360,000 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 January $339,000 76,000 February 322,000 69,000 March 306,000 62,000 The Machining Department supervisor has...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year: Niland Company Machining Department Monthly Production Budget Wages $484,000 Utilities 36,000 Depreciation 61,000 Total $581,000 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 January $549,000 111,000 February 525,000 101,000 March 502,000 91,000 The Machining Department supervisor has...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year: Niland Company Machining Department Monthly Production Budget Wages $767,000 Utilities 44,000 Depreciation 73,000 Total $884,000 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 January $833,000 67,000 February 795,000 61,000 March 759,000 55,000 The Machining Department supervisor has...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year: Niland Company Machining Department Monthly Production Budget Wages $255,000 Utilities 17,000 Depreciation 28,000 Total $300,000 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 January $283,000 65,000 February 270,000 59,000 March 257,000 53,000 The Machining Department supervisor has...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year: Niland Company Machining Department Monthly Production Budget Wages $1,127,000 Utilities 56,000 Depreciation 94,000 Total $1,277,000 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 January $1,203,000 94,000 February 1,140,000 85,000 March 1,092,000 77,000 The Machining Department supervisor has...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year: Niland Company Machining Department Monthly Production Budget Wages $333,000 Utilities 24,000 Depreciation 40,000 Total $397,000 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 January $374,000 109,000 February 357,000 99,000 March 341,000 89,000 The Machining Department supervisor has...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year: Niland Company Machining Department Monthly Production Budget Wages $698,000 Utilities 43,000 Depreciation 72,000 Total $813,000 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 January $767,000 122,000 February 732,000 111,000 March 699,000 100,000 The Machining Department supervisor has...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year: Niland Company Machining Department Monthly Production Budget Wages $593,000 Utilities 31,000 Depreciation 53,000 Total $677,000 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 January $638,000 128,000 February 611,000 117,000 March 580,000 105,000 The Machining Department supervisor has...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed...
Static Budget versus Flexible Budget The production supervisor of the Machining Department for Niland Company agreed to the following monthly static budget for the upcoming year: Niland Company Machining Department Monthly Production Budget Wages $590,000 Utilities 28,000 Depreciation 47,000 Total $665,000 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 January $626,000 57,000 February 598,000 52,000 March 571,000 47,000 The Machining Department supervisor has...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT