Question

Check my work Packaging Solutions Corporation manufactures and sells a wide variety of packaging products. Performance reports are prepared monthly for each department. The planning budget and flexible budget for the Production Department are based on the following formulas, where q is the number of labor-hours worked in a month: 1.33 points eBook Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration Cost Formulas $16.204 $4,100 + $1.909 $5,200 + $0.600 $1,500 + $0.30q $18,400 + $2.909 $8,100 $2,800 $13,200 + $0.604 Print References The Production Department planned to work 4,000 labor-hours in March; however, it actually worked 3,800 labor-hours during the month. Its actual costs incurred in March are listed below: Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration Actual Cost Incurred in March $63, 120 $ 10,880 $ 7,990 $ 2,910 $ 29, 420 $ 8,500 $ 2,800 $ 14,830 Required: 1. Prepare the Production Department's planning budget for the month. 2. Prepare the production Department's flexible budget for the month. 3. Prepare the Production Department's flexible budget performance report for March, including both the spending and activity variances.

Answer 1

Ans. 1	Packaging Solutions Corporation
	Production Department Planning Budget
	For the Month Ended March 31
	Labor hours	4000
	Direct labor	$64,800
	Indirect labor	$11,700
	Utilities	$7,600
	Supplies	$2,700
	Equipment depreciation	$30,000
	Factory rent	$8,100
	Property taxes	$2,800
	Factory administration	$15,600
	Total expenses	$143,300
Ans. 2	Packaging Solutions Corporation
	Production Department Flexible Budget
	For the Month Ended March 31
	Labor hours	3800
	Direct labor	$61,560
	Indirect labor	$11,320
	Utilities	$7,480
	Supplies	$2,640
	Equipment depreciation	$29,420
	Factory rent	$8,100
	Property taxes	$2,800
	Factory administration	$15,480
	Total expenses	$138,800
	*Calculations for Flexible budget & Planning budget:
		Planning Budget	Flexible Budget
	Labor hours	4000	3800
	Direct labor	$16.20 * 4,000	$16.20 * 3,800
	Indirect labor	$4,100 + ($1.90*4,000)	$4,100 + ($1.90*3,800)
	Utilities	$5,200 + ($0.60*4,000)	$5,200 + ($0.60*3,800)
	Supplies	$1,500 + ($0.30*4,000)	$1,500 + ($0.30*3,800)
	Equipment depreciation	$18,400 + ($2.90*4,000)	$18,400 + ($2.90*3,800)
	Factory rent	$8,100	$8,100
	Property taxes	$2,800	$2,800
	Factory administration	$13,200 + ($0.60*4,000)	$13,200 + ($0.60*3,800)
Ans. 3	Packaging Solutions Corporation
	Production Department Flexible Budget Performance Report
	For the Month Ended March 31
		Actual Results	Spending variance		Flexible Budget	Activity variance		Planning Budget
	Labor hours	3800			3800			4000
	Direct labor	$63,120	$1,560	U	$61,560	$3,240	F	$64,800
	Indirect labor	$10,880	$440	F	$11,320	$380	F	$11,700
	Utilities	$7,990	$510	U	$7,480	$120	F	$7,600
	Supplies	$2,910	$270	U	$2,640	$60	F	$2,700
	Equipment depreciation	$29,420	$0	none	$29,420	$580	F	$30,000
	Factory rent	$8,500	$400	U	$8,100	$0	none	$8,100
	Property taxes	$2,800	$0	none	$2,800	$0	none	$2,800
	Factory administration	$14,830	$650	F	$15,480	$120	F	$15,600
	Total expenses	$140,450	$1,650	U	$138,800	$4,500	F	$143,300
	Spending variance   =   Actual results - Flexible budget
	Activity variance =   Flexible budget - Planning budget
	*Flexible budget is prepared on the basis of actual units (labor hours).
	*Fixed expenses remain same as planning budget.
	*Increase in expenses from flexible budget to actual results & Planning budget to flexible budget =   Unfavorable.
	*Decrease in expenses from flexible budget to actual results & Planning budget to flexible budget =   Favorable.