The production supervisor of the Machining Department for Nell Company agreed to the following monthly static budget
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 2010 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.b. Compare the flexible budget with the actual expenditures for the first three months. What does this comparisonsuggest?
Transcribed Image Text:
Nell Company Machining Department Monthly Production Budget Wages Utilities $540,000 60,000 $636,000 Depreciation Total
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a Depreciation is a fixed cost so it does not flex with changes in production Since it is the only f...View the full answer
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