The production supervisor of the Machining Department for Nell Company agreed to the following month 1 answer below »

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 $343,000 Utilities 25,000 Depreciation 41,000 Total $409,000

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 $386,000 90,000 February 369,000 82,000 March 354,000 74,000

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 $14.00 Utility cost per direct labor hour $1.00 Direct labor hours per unit 0.25 Planned monthly unit production 98,000 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.

Nell Company-Machining Department

Flexible Production Budget

For the Three Months Ending March 31, 2014




Units of production




















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 $ $ $

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