1. Morningside Technologies Inc. uses flexible budgets that arebased on the following data:

   Sales commissions	6% of sales
   Advertising expense	15% of sales
   Miscellaneous administrative expense	$1,450 per month plus 3% of sales
   Office salaries expense	$14,000 per month
   Customer support expenses	$2,050 plus 4% of sales
   Research and development expense	4,500 per month

2. Prepare a flexible selling and administrative expenses budgetfor April for sales volumes of $90,000, $115,000, and $135,000.Enter all amounts as positive numbers.

   Morningside Technologies Inc.
   Flexible Selling and Administrative ExpensesBudget
   For the Month Ending April 30
   Total sales	$90,000	$115,000	$135,000
   Variable cost:
   Sales commissions	$	$	$
   Advertising expense
   Miscellaneous administrative expense
   Customer support expenses
   Total variable cost	$	$	$
   Fixed cost:
   Miscellaneous administrative expense	$	$	$
   Office salaries expense
   Customer support expenses
   Research and development expense
   Total fixed cost	$	$	$
   Total selling and administrative expenses	$	$	$

3. Personal Budget

   At the beginning of the school year, Katherine Malloy decided toprepare a cash budget for the months of September, October,November, and December. The budget must plan for enough cash onDecember 31 to pay the spring semester tuition, which is the sameas the fall tuition. The following information relates to thebudget:

   Cash balance, September 1 (from a summer job)	$6,730
   Purchase season football tickets in September	90
   Additional entertainment for each month	230
   Pay fall semester tuition in September	3,600
   Pay rent at the beginning of each month	320
   Pay for food each month	180
   Pay apartment deposit on September 2 (to be returned December15)	500
   Part-time job earnings each month (net of taxes)	830

   a. Prepare a cash budget for September,October, November, and December. Enter all amounts as positivevalues except an overall cash decrease which should be indicatedwith a minus sign.

   KATHERINE MALLOY
   Cash Budget
   For the Four Months Ending December 31
   	September	October	November	December
   Estimated cash receipts from:
   Part-time job	$	$	$	$
   Deposit
   Total cash receipts	$	$	$	$
   Estimated cash payments for:
   Season football tickets	$
   Additional entertainment		$	$	$
   Tuition
   Rent
   Food
   Deposit
   Total cash payments	$	$	$	$
   Overall cash increase (decrease)	$	$	$	$
   Cash balance at beginning of month
   Cash balance at end of month	$	$	$	$

   b. Are the four monthly budgets that arepresented prepared as static budgets or flexible budgets?
   c. Malloy can see that her presentplan   sufficient cash. If Malloy did not budget butwent ahead with the original plan, she would be$   at the end of December, with no time left toadjust.

4. Static Budget versus Flexible Budget

   The production supervisor of the Machining Department for NilandCompany agreed to the following monthly static budget for theupcoming year:

   Niland Company Machining Department Monthly Production Budget
   Wages	$396,000
   Utilities	34,000
   Depreciation	57,000
   Total	$487,000

   The actual amount spent and the actual units produced in thefirst three months in the Machining Department were as follows:

   	Amount Spent	Units Produced
   January	$460,000		121,000
   February	441,000		110,000
   March	422,000		99,000

   The Machining Department supervisor has been very pleased withthis performance because actual expenditures for January–March havebeen less than the monthly static budget of $487,000. However, theplant manager believes that the budget should not remain fixed forevery month but should “flex” or adjust to the volume of work thatis produced in the Machining Department. Additional budgetinformation for the Machining Department is as follows:

   Wages per hour	$15.00
   Utility cost per direct labor hour	$1.30
   Direct labor hours per unit	0.20
   Planned monthly unit production	132,000

   a. Prepare a flexible budget for the actualunits produced for January, February, and March in the MachiningDepartment. Assume that depreciation is a fixed cost. Enter allamounts as positive numbers. If required, use per unit amountscarried out to two decimal places.

   Niland Company-Machining Department
   Flexible Production Budget
   For the Three Months Ending March 31
   	January	February	March
   Units of production
   Wages	$	$	$
   Utilities
   Depreciation
   Total	$	$	$

   b. Compare the flexible budget with the actualexpenditures for the first three months.

   	January	February	March
   Total flexible budget	$	$	$
   Actual cost
   Excess of actual cost over budget	$	$	$

   What does this comparison suggest?

   The Machining Department has performed better than originallythought.
   The department is spending more than would be expected.

5. Flexible Budget for Assembly Department

   Cabinaire Inc. is one of the largest manufacturers of officefurniture in the United States. In Grand Rapids, Michigan, itassembles filing cabinets in an Assembly Department. Assume thefollowing information for the Assembly Department:

   Direct labor per filing cabinet	30 minutes
   Supervisor salaries	$147,000 per month
   Depreciation	$20,000 per month
   Direct labor rate	$15 per hour

   Prepare a flexible budget for 14,000, 18,000, and 21,000 filingcabinets for the month of August in the Assembly Department,similar to Exhibit 5. Assuming that inventories are notsignificant. Enter all amounts as positive numbers.

   CABINAIRE INC-ASSEMBLY DEPARTMENT
   Flexible Production Budget
   For the Month Ending August 31 (assumed data)
   Units of production	14,000	18,000	21,000
   Variable cost:
   Direct labor	$	$	$
   Total variable cost	$	$	$
   Fixed cost:
   Supervisor salaries	$	$	$
   Depreciation
   Total fixed cost	$	$	$
   Total department cost	$	$	$