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 qis the number of labor-hours worked in a month: Cost Formulas $16.10g $4,500 $1.30q $5,400 $0.30q $1,800 $0.30q $18,700 $2.70q $8,100 $2,600 $13,200 $0.90q Direct labor Indirect labor Utilities Supplies mok Equipment depreciation Factory rent Property taxes Prnt Factory administration terences The Production Department planned to work 4,100 labor-hours in March; however, it actually worked 3,900 labor-hours during the month Its actual costs incurred in March are listed below Actual Cost Incurred in March $64,330 $9,810 $ 7,020 $ 3,240 $29,230 $ 8,500 $2,600 $16,120 Direct labor 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 Departrmentt's flexible budget for the month 3. Calculate the spending variances for all expense items

Answer 1

1
Planning Budget
Budgeted labor hours	4100
Direct labor	66010	=4100*16.1
Indirect labor	9830	=4500+(4100*1.3)
Utilities	6630	=5400+(4100*0.3)
Supplies	3030	=1800+(4100*0.3)
Equipment Depreciation	29770	=18700+(4100*2.7)
Factory rent	8100
Property taxes	2600
Factory administration	16890	=13200+(4100*0.9)
Total expenses	142860
2
Flexible Budget
Actual labor hours	3900
Direct labor	62790	=3900*16.1
Indirect labor	9570	=4500+(3900*1.3)
Utilities	6570	=5400+(3900*0.3)
Supplies	2970	=1800+(3900*0.3)
Equipment Depreciation	29230	=18700+(3900*2.7)
Factory rent	8100
Property taxes	2600
Factory administration	16710	=13200+(3900*0.9)
Total expenses	138540
3
	Actual	Spending variance		Flexible budget
Labor hours	3900			3900
Direct labor	64330	1540	U	62790
Indirect labor	9010	560	F	9570
Utilities	7020	450	U	6570
Supplies	3240	270	U	2970
Equipment Depreciation	29230	0	None	29230
Factory rent	8500	400	U	8100
Property taxes	2600	0	None	2600
Factory administration	16120	590	F	16710
Total expenses	140050	1510	U	138540