The production supervisor of the Machining Department for Nell Company agreed to
ID: 2424638 • Letter: T
Question
The production supervisor of the Machining Department for Nell Company agreed to the following monthly static budget for the upcoming year:
The actual amount spent and the actual units produced in the first three months of 2016 in the Machining Department were as follows:
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:
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.
b. Compare the flexible budget with the actual expenditures for the first three months.
What does this comparison suggest?
Nell CompanyMachining Department
Monthly Production Budget Wages $549,000 Utilities 38,000 Depreciation 64,000 Total $651,000
Explanation / Answer
a.
Flexible Budget is prepared as under:
b.
Comparison of actual budget and flexible budget is shown as below:
This comparison is suggesting that the department is spending more than expected.
Neil company-Machining Department Flexible Production Budget For the three month ending March 31,2016 Particulars January February March Units of production 63,000 58,000 52,000 Direct Labour 31,500 29,000 26,000 Wages 504,000 464,000 416,000 Utilities 34,650 31,900 28,600 Depreciation 64,000 64,000 64,000 Total 602,650 559,900 508,600Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.