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	$16.30q
Indirect labor	$4,300 + $1.60q
Utilities	$5,400 + $0.80q
Supplies	$1,700 + $0.20q
Equipment depreciation	$18,700 + $2.90q
Factory rent	$8,100
Property taxes	$2,400
Factory administration	$13,400 + $0.80q

The Production Department planned to work 4,200 labor-hours in March; however, it actually worked 4,000 labor-hours during the month. Its actual costs incurred in March are listed below:

	Actual Cost Incurred in March
Direct labor	$	66,780
Indirect labor	$	10,200
Utilities	$	9,150
Supplies	$	2,750
Equipment depreciation	$	30,300
Factory rent	$	8,500
Property taxes	$	2,400
Factory administration	$	15,990

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

1)

2)

3)