The production supervisor of the Machining Department

for Rodriguez Company #6956

The production supervisor of the Machining Department for Rodriguez Company agreed to the
following monthly static budget for the upcoming year:Rodriguez CompanyMachining
DepartmentMonthly Production BudgetWages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . $384,000Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,000Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000Total . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $480,000The 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 because actual expenditures for January-March have been less than the monthly
static budget of $480,000. 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....................................................... $16.00Utility cost per direct labor
hour.................................... $1.50Direct labor hours per unit...........................................
0.20Planned monthly unit production................................... 120,000a. 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 comparison suggest?View Solution:
The production supervisor of the Machining Department for Rodriguez Company

ANSWER
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