The Machining Department supervisor has been very pleased with this performance, since actual expenditures have been less than the monthly budget.
|Sales commissions||8% of sales|
|Advertising expense||21% of sales|
|Miscellaneous selling expense||$1,800 plus 4% of sales|
|Office salaries expense||$12,000 per month|
|Office supplies expense||5% of sales|
|Miscellaneous administrative expense||$1,300 per month plus 3% of sales|
Prepare a flexible selling and administrative expenses budget for January 2014, for sales volumes of $80,000, $100,000, and $120,000. (Use Exhibit 5 as a model.) Enter all amounts as positive numbers.
The production supervisor of the Machining Department for Nell Company agreed to the following monthly static budget for the upcoming year:
Monthly Production Budget
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|
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||$17.00|
|Utility cost per direct labor hour||$1.40|
|Direct labor hours per unit||0.20|
|Planned monthly unit production||136,000|
a. Prepare a flexible budget for the actual units produced for January, February, and March in the Machining Department. Assume depreciation is a fixed cost. Enter all amounts as positive numbers. If required, use per unit amounts carried out to two decimal places.
|Total flexible budget||$[removed]||$[removed]||$[removed]|
|Excess of actual cost over budget||$[removed]||$[removed]||$[removed]|
What does this comparison suggest?
Cabinaire Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it produces filing cabinets in two departments: Fabrication and Trim Assembly. Assume the following information for the Fabrication Department:
|The Machining Department has performed better than originally thought. YES OR NO|
|The department is spending more than would be expected. YES OR NO|
|Steel per filing cabinet||48 pounds|
|Direct labor per filing cabinet||30 minutes|
|Supervisor salaries||$147,000 per month|
|Depreciation||$24,000 per month|
|Direct labor rate||$12 per hour|
|Steel cost||$1.53 per pound|
Prepare a flexible budget for 15,000, 19,000, and 23,000 filing cabinets for the month of October 2014, similar to Exhibit 5, assuming that inventories are not significant. Enter all amounts as positive numbers.