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  1. 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 $311,000
    Utilities 16,000
    Depreciation 27,000
    Total $354,000

    The actual amount spent and the actual units produced in the first three months of 2016 in the Machining Department were as follows:

      Amount Spent Units Produced
    January $334,000   68,000  
    February 319,000   62,000  
    March 305,000   56,000  

    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 $21
    Utility cost per direct labor hour $1.1
    Direct labor hours per unit 0.2
    Planned monthly unit production 74,000

    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, 2016
      January February March
    Units of production NaN more Check My Work uses remaining.
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