Triway Packaging Corporation manufactures and sells a wide variety of packaging products. Performance reports are prepared monthly for each department. The planning budget and flexible budget fur the Production Department are based on the following formulas. where q is the number of direct labor-hours worked in a month:
Direct labor |
| $ 16.30q |
Indirect labor | $ 4,300 | + $1.,80q |
Utilities | $ 5,600 | + $0.70q |
Supplies | $ 1,400 | + $0.30q |
Equipment depreciation | $ 18,600 | + $2.80q |
Factory rent |
| $ 8,300 |
Property taxes |
| $ 2,800 |
Factory administration | $ 13,400 | + $0.90q |
The actual costs incurred in November in the Production Department are listed below:
| Actual Cost Incurred in November |
Direct labor . | $ 563,520 |
Indirect labor . | $ 10,680 |
Utilities | $ 8,790 |
Supplies | $ 2,810 |
Equipment depreciation | $ 29,240 |
Factory rent . | $ 8,700 |
Property taxes . | $ 2,800 |
Factory administration | $ 16,230 |
Required:
1. The company had budgeted for an activity level of 4.000 labor - hours in November. Prepare the Production Department’s planning budget for the month.
2. The company actually worked 3,800 labor-hours in November. Prepare the Production Depart ment’s flexible budget for the month.
3. Prepare the Production Department’s flexible budget performance report for November. including both the activity and spending variances.
4. What aspects of the flexible budget performance report should be brought to management’s attention? Explain.
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