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 is the number of labor-hours worked in a month: Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration Cost Formulas $16.609 $4,700 + $1.800 $5,700 + $0.309 $1,400 + $0.109 $18,700 + $2.609 $8,100 $2,400 $13,100 + $0.709 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: Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration Actual Cost Incurred in March $ 66,380 $11,260 $ 7.320 $ 2.020 $28.840 $ 8,500 $ 2.400 $ 15,200 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

	Packaging Solutions Corporation
	Planning Budget
	For the month ended March 31st
	Budgeted Labor Hour	$       4,100.00
	Direct Labor(4100*$16.6)	$     68,060.00
	Indirect Labor($4700+4100*$1.80)	$     12,080.00
	Utilities($5700+4100*.30)	$       6,930.00
	Supplies($1400+4100*.10)	$       1,810.00
	Equipment Depreciation($18700+4100*$2.6)	$     29,360.00
	Factory Rent	$       8,100.00
	Property Taxes	$       2,400.00
	Factory Administration($13100+4100*.70)	$     15,970.00
	Total Expenses	$ 1,44,710.00
	Packaging Solutions Corporation
	Flexible Budget
	For the month ended March 31st
	Budgeted Labor Hour	$       3,900.00
	Direct Labor(3900*$16.60)	$     64,740.00
	Indirect Labor($4700+3900*$1.80)	$     11,720.00
	Utilities($5700+3900*$.30)	$       6,870.00
	Supplies($1400+3900*$.10)	$       1,790.00
	Equipment Depreciation($18700+3900*$2.60)	$     28,840.00
	Factory Rent	$       8,100.00
	Property Taxes	$       2,400.00
	Factory Administration($13100+3900*.70)	$     15,830.00
	Total Expenses	$ 1,40,290.00
	Packaging Solutions Corporation
	Performance Report
	For the month ended March 31st
		(A)	(B)=(A)-(C )		(C )	(D)=(C )-(E )		(E )
		Actual	Spending Variance		Flexible budget	Activity Variance		Planning Budget
	Labor Hour	$       3,900.00			$            3,900.00			$                4,100.00
	Direct Labor	$     66,380.00	$                   1,640.00	(U)	$          64,740.00	$             3,320.00	(F)	$              68,060.00
	Indirect Labor	$     11,260.00	$                      460.00	(F)	$          11,720.00	$                 360.00	(F)	$              12,080.00
	Utilities	$       7,320.00	$                      450.00	(U)	$            6,870.00	$                   60.00	(F)	$                6,930.00
	Supplies	$       2,020.00	$                      230.00	(U)	$            1,790.00	$                   20.00	(F)	$                1,810.00
	Equipment Depreciation	$     28,840.00	$                                -		$          28,840.00	$                 520.00	(F)	$              29,360.00
	Factory Rent	$       8,500.00	$                      400.00	(U)	$            8,100.00	$                          -		$                8,100.00
	Property Taxes	$       2,400.00	$                                -		$            2,400.00	$                          -		$                2,400.00
	Factory Administration	$     15,200.00	$                      630.00	(F)	$          15,830.00	$                 140.00	(F)	$              15,970.00
	Total Expenses	$ 1,41,920.00	$                   1,630.00	(U)	$      1,40,290.00	$             4,420.00	(F)	$          1,44,710.00