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
Direct labor	$16.50q
Indirect labor	$4,600 + $2.00q
Utilities	$5,700 + $0.60q
Supplies	$1,600 + $0.20q
Equipment depreciation	$18,700 + $3.00q
Factory rent	$8,600
Property taxes	$3,000
Factory administration	$13,400 + $0.70q

The Production Department planned to work 4,400 labor-hours in March; however, it actually worked 4,200 labor-hours during the month. Its actual costs incurred in March are listed below:

	Actual Cost Incurred in March
Direct labor	$	70,920
Indirect labor	$	12,580
Utilities	$	8,730
Supplies	$	2,690
Equipment depreciation	$	31,300
Factory rent	$	9,000
Property taxes	$	3,000
Factory administration	$	15,710

1. Prepare the Production Department’s planning budget for the month.

	Packaging Solutions Corporation Production Department Planning Budget For the Month Ended March 31 Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration Total expense

2.Prepare the Production Department’s flexible budget for the month.

	Packaging Solutions Corporation Production Department Flexible Budget For the Month Ended March 31 Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration Total expense

3. Prepare the Production Department’s flexible budget performance report for March, including both the spending and activity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

	Packaging Solutions Corporation Production Department Flexible Budget Performance Report For the Month Ended March 31 Actual Results Flexible Budget Planning Budget Labor-hours 4,200 Direct labor $70,920 Indirect labor 12,580 Utilities 8,730 Supplies 2,690 Equipment depreciation 31,300 Factory rent 9,000 Property taxes 3,000 Factory administration 15,710 Total expense $153,930

Answer 1

Packaging Solutions Corporation Packing solution corp Production dep Planning budget For month ended march 31st Budgeted labor hours (a) 4,400 Direct labor (16.50 x a) 72,600 Indirect labor (4,600 +2.00 (a) 13,400 Utilities (5700+.60 (a) 8,340 Supplies ($1600 + $0.20 (a) 2,480 Equipment depreciation (18,700 +3.00 (a) 31,900 Factory rent (8600) $ 8,600 Property taxes ($3000) $3,000 Factory administration (13,400 +0.70 (a) 16,480 Total Expense $1,56,800 Packing solution corp Production dep Flexible budget For month ended march 31st Actual labor hours (a) 4,200 Direct labor (16.50 x a) $ 69,300 Indirect labor (4,600+ 2.00 (a) 13,000 Utilities (5700 +.60 (a) 8,220 Supplies ($1600 + $0.20 (a) 2,440 Equipment depreciation (18,700 +3.00 (a) 31,300 Factory rent (8600) $ 8,600 Property taxes ($3000) $3,000 Factory administration (13,400 +0.70 (a) 16,340 Total Expense $1,52,200 3) Packing solution corp Production dep Flexible budget performance report For month ended march 31st Spending Variances Budgeted labor hours (a) Direct labor (16.50 x a) Indirect labor (4,200 +2.00 (a) Utilities (5300 +.70 (a) Supplies ($1600 + $0.30 (a) Equipment depreciation (18,600 +2.70 (a) Factory rent (8500) Property taxes ($3000) Factory administration (13,800+ 0.60 (a) Total Expense Planing budget Activity Variances 4,400 $ 72,600 $3,300 F $ 13,400 $ 400 F $ 8,340 $ 120F $ 2,480 $ 40 F $ 31,900 $ 600 F $ 8,600 $ - $ 3,000 $ - $ 16,480 $ 140 F | $1,56,800 $4,600 F Flexible Budget 4,200 $ 69,300 $ 13,000 $ 8,220 $ 2,440 $ 31,300 $ 8,600 $ 3,000 $ 16,340 $1,52,200 $ 1,620 U $ 420 F $ 510 U $ 250 U $ - $ 400 U $ $ 650 F $ 1,730 U Actual Results 4,200 $ 70,920 $ 12,580 $ 8,730 $ 2,690 $ 31,300 $ 9,000 $ 3,000 $ 15,710 $1,53,930