Question

Niland Company Machining Department Monthly Production Budget Wages Utilities $569,000 35,000 58,000 Depreciation Total $662,000 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 $624,000 116,000 February 593,000 105,000 March 568,000 95,000 The Machining Department supervisor has been very pleased with this performance because actual expenditures for January-March have been significantly less than the monthly static budget of 662,000. 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 $18 Utility cost per direct labor hour $1.1 Direct labor hours per unit Planned monthly unit production 0.25 126,000

Answer 1

Supporting calculations
	January	February	March
Unit of production	116,000	105,000	95,000
Multiply: hour per unit	0.25	0.25	0.25
Total hours for production	29,000	26,250	23,750
Multiply: wages per hour	$            18.00	$          18.00	$        18.00
Total wages	$        522,000	$     472,500	$   427,500
Total hours for production	29,000	26,250	23,750
Multiply: utilities cost per hour	$               1.10	$            1.10	$          1.10
Total utilities	$          31,900	$        28,875	$     26,125
Niland Company
Machining Company
Monthly Production Report
	January	February	March
Unit of production	116,000	105,000	95,000
Wages	$        522,000	$     472,500	$   427,500
Utilities	$          31,900	$        28,875	$     26,125
Depreciation	$          58,000	$        58,000	$     58,000
Total	$        611,900	$     559,375	$   511,625
	January	February	March
Total flexible budget	$        611,900	$     559,375	$   511,625
Actual cost	$        624,000	$     593,000	$   568,000
Excess of actual cost over budget (Actual cost - Total flexible budget)	$          12,100	$        33,625	$     56,375
The machining department has performed better than originally thought. (hint: The machining department has performed worse than expected.)			No
The department is spending more than would be expected.			Yes