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 $16.50q $4,600 $1.50q $5,200 $0.40q $1,500 Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration $0.40q $18,600 $2.70q $8,500 $2,700 $13,100 $0.90q 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 Direct labor Indirect labor 65,970 S 9,930 $ 7,230 S 3,350 29,130 ৪,900 $ 2,700 16,020 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. Prepare the Production Department's flexible budget performance report for March, including both the spending and activity variances

Answer 1

Correct Answer:

Requirement a:

Packaging solutions Corporation
Production Department planning budget
For the month ended March 31
Labor hours	4100
Direct labor	$       67,650.00
Indirect labor	$       10,750.00
utilities	$          6,840.00
supplies	$          3,140.00
Equipment	$       29,670.00
Factory rent	$          8,500.00
Property taxes	$          2,700.00
Factory administration	$       16,790.00
Total expense	$     146,040.00

Requirement b:

Packaging solutions Corporation
Production Department Flexible budget
For the month ended March 31
Labor hours	3900
Direct labor	$              64,350.00
Indirect labor	$              10,450.00
utilities	$                6,760.00
supplies	$                3,060.00
Equipment	$              29,130.00
Factory rent	$                8,500.00
Property taxes	$                2,700.00
Factory administration	$              16,610.00
Total expense	$           141,560.00

Requirement c:

Packaging solutions Corporation
Production Department Flexible budget performance Report
For the month ended March 31
	Actual Result	variance		Flexible budget	variance		Planning budget
Labor hours	3900	0	N	3900	-200	U	4100
Direct labor	$             65,970	$ 1,620	U	$         64,350	$ (3,300)	F	$          67,650
Indirect labor	$                9,930	$   (520)	F	$         10,450	$     (300)	F	$          10,750
utilities	$                7,230	$      470	U	$            6,760	$        (80)	F	$            6,840
supplies	$                3,350	$      290	U	$            3,060	$        (80)	F	$            3,140
Equipment	$             29,130	$         -	N	$         29,130	$     (540)	F	$          29,670
Factory rent	$                8,900	$      400	U	$            8,500	$           -	N	$            8,500
Property taxes	$                2,700	$         -	N	$            2,700	$           -	N	$            2,700
Factory administration	$             16,020	$   (590)	F	$         16,610	$     (180)	F	$          16,790
Total expense	$           143,230	$ 1,670	U	$       141,560	$ (4,480)	F	$        146,040

End of answer.

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