Agent blaze uses flexible budgets that are based on the following

Static Budget vs. Flexible Budget

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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 $460,000
Utilities 38,000
Depreciation 63,000
Total $561,000

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
January $530,000   124,000  
February 508,000   113,000  
March 487,000   102,000  

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 $17.00
Utility cost per direct labor hour $1.40
Direct labor hours per unit 0.20
Planned monthly unit production 136,000

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