Question

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: Cost Formulas $15.80q $8,200 $1.60g $6,400 $0.80q $1,100 $0.40q $23,000 $3.70g $8,400 Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration $2,100 $11,700$1.90g The Production Department planned to work 8,000 labor-hours in March; however, it actually worked 8,400 labor-hours during the month. Its actual costs incurred in March are listed below Actual Cost Incurred in March Direct labor $134,730 $ 19,860 $14,570 $4,980 $ 54,080 $ 8,700 $ 2,100 $ 26,470 Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration Required: 1. Prepare the Production Department's planning budget for the month 2. Prepare the Production Department's flexible budget for the month. 3. Calculate the spending variances for all expense items.

Answer 1

Solution 1:

Packaging Solution Corporation
Production department planning budget
For the month ended March 31
Particulars	Amount
Labor Hours	8000
Direct labor (8000*$15.80)	$1,26,400.00
Indirect labor ($8200 + 8000*$1.60)	$21,000.00
Utilities ($6400 + 8000*$0.80)	$12,800.00
Supplies ($1100 + 8000*$0.40)	$4,300.00
Equipment Depreciation ($23000+8000*$3.70)	$52,600.00
Factory Rent	$8,400.00
Property tax	$2,100.00
Factory Administration ($11700 + 8000*$1.90)	$26,900.00
Total expense	$2,54,500.00

Solution 2:

Packaging Solution Corporation
Production department flexible budget
For the month ended March 31
Particulars	Amount
Labor Hours	8400
Direct labor (8400*$15.80)	$1,32,720.00
Indirect labor ($8200 + 8400*$1.60)	$21,640.00
Utilities ($6400 + 8400*$0.80)	$13,120.00
Supplies ($1100 + 8400*$0.40)	$4,460.00
Equipment Depreciation ($23000+8400*$3.70)	$54,080.00
Factory Rent	$8,400.00
Property tax	$2,100.00
Factory Administration ($11700 + 8400*$1.90)	$27,660.00
Total expense	$2,64,180.00

Solution 3:

Particulars	Actual Results	Revenue and spending variances		Flexible Budget
Labor Hours	8400			8400
Direct labor	$1,34,730.00	$2,010.00	U	$1,32,720.00
Indirect labor	$19,860.00	$1,780.00	F	$21,640.00
Utilities	$14,570.00	$1,450.00	U	$13,120.00
Supplies	$4,980.00	$520.00	U	$4,460.00
Equipment Depreciation	$54,080.00	$0.00	None	$54,080.00
Factory Rent	$8,700.00	$300.00	U	$8,400.00
Property tax	$2,100.00	$0.00	None	$2,100.00
Factory Administration	$26,470.00	$1,190.00	F	$27,660.00
Total expense	$2,65,490.00	$1,310.00	U	$2,64,180.00