Flexible Budgets with ABC The Cameron Corporation uses an ABC system, with the following manufacturing support (i.e., factory overhead) costs:

Unit-level support costs:

Electricity                                              $1.00 per machine hour

Maintenance labor                                  $1.50 per machine hour Batch-level support costs:

Production set-ups                                $300 per setup

Incoming Inspection                               $100 per purchase order Product-level support costs:

Engineering  support                              $2,000 per engineering change order (ECO) Facilities-level support costs:

Depreciation-plant                                  $15,000 per month

Insurance and property taxes                  $5,000 per month

The plant manager has asked you to prepare flexible (control) budgets for three levels of possible activity for the coming month: 4,000 machine hours, 5,000 machine hours, and 6,000 machine hours. Associated activity levels for manufacturing support costs are as follows:

Required

1. Use an Excel spreadsheet to prepare a flexible (control) budget for the following three output levels:

(a) 4,000 machine hours, (b) 5,000 machine hours, and (c) 6,000 machine hours.

2. How do these flexible budgets differ from those prepared under a traditional approach (e.g., for the case where a single activity measure, machine hours, is used to construct the flexible (control) budget)?