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: Direct labor $ 16.40 q Indirect labor $ 4,000 + $ 1.70 q Utilities $ 5,600 + $ 0.50 q Supplies $ 1,600 + $ 0.40 q Equipment depreciation $ 18,200 + $ 2.40 q Factory rent $ 8,400 Property taxes $ 2,900 Factory administration $ 13,100 + $ 0.80 q The actual costs incurred in March in the Production Department are listed below: Actual Cost Incurred in March Direct labor $ 72,120 Indirect labor $ 10,830 Utilities $ 8,240 Supplies $ 3,610 Equipment depreciation $ 28,520 Factory rent $ 8,800 Property taxes $ 2,900 Factory administration $ 15,930. Actual Labor Hours 44,300, and Budget Labor Hours 4,500

Required: 3. Complete the Production Department’s flexible budget performance report for March, including both the spending and activity variances.

Answer 1

Packing Solutions Corporation
Planning Budget
For the Month Ended March 31
	Planning Budget
Direct Labor Hour (hrs)	4,500
Direct Labor ($16.40q)	73,800
Indirect Labor ($4000+ $1.70q)	11,650
Utilities (5600+$0.50q)	7,850
Supplies ($1600+ $0.40q)	3,400
Equipment Depreciation ($18,200+$2.4q)	29,000
Factory Rent ($8,400)	8,400
Property taxes ($2,900)	2,900
Factory administration ($13,100 + $0.80q)	16,700
Total expense	153,700
Packing Solutions Corporation
Flexible Budget
For the Month Ended March 31
	Flexible Budget
Direct Labor Hour (hrs)	4,300
Direct Labor ($16.40q)	70,520
Indirect Labor ($4000+ $1.70q)	11,310
Utilities (5600+$0.50q)	7,750
Supplies ($1600+ $0.40q)	3,320
Equipment Depreciation ($18,200+$2.4q)	28,520
Factory Rent ($8,400)	8,400
Property taxes ($2,900)	2,900
Factory administration ($13,100 + $0.80q)	16,540
Total expense	149,260
Packing Solutions Corporation
Activity Variances
For the Month Ended March 31
	Planning Budget	Flexible Budget	Activity Variances
Direct Labor Hour	4,500	4,300
Expenses:
Direct Labor ($16.40q)	73,800	70,520	3,280	F
Indirect Labor ($4000+ $1.70q)	11,650	11,310	340	F
Utilities (5600+$0.50q)	7,850	7,750	100	F
Supplies ($1600+ $0.40q)	3,400	3,320	80	F
Equipment Depreciation ($18,200+$2.4q)	29,000	28,520	480	F
Factory Rent ($8,400)	8,400	8,400	0
Property taxes ($2,900)	2,900	2,900	0
Factory administration ($13,100 + $0.80q)	16,700	16,540	160	F
Total expense	153,700	149,260	4,440	F
Packing Solutions Corporation
Spending Variances
For the Month Ended March 31
	Flexible Budget	Actual Results	Activity Variances
Direct Labor Hour	4,300	4,300
Expenses:
Direct Labor ($16.40q)	70,520	72,120	1,600	U
Indirect Labor ($4000+ $1.70q)	11,310	10,830	480	F
Utilities (5600+$0.50q)	7,750	8,240	490	U
Supplies ($1600+ $0.40q)	3,320	3,610	290	U
Equipment Depreciation ($18,200+$2.4q)	28,520	28,520	0
Factory Rent ($8,400)	8,400	8,800	400	U
Property taxes ($2,900)	2,900	2,900	0
Factory administration ($13,100 + $0.80q)	16,540	15,930	610	F
Total expense	149,260	150,950	1,690	U
Packing Solutions Corporation
Flexible Budget performance Report
For the Month Ended March 31
	Planning Budget	Activity Variance		Flexible Budget	Spending Variance		Actual Results
Direct Labor Hour	4,500			4,300			4,300
Expenses:
Direct Labor ($16.40q)	73,800	1,600	F	70,520	1,600	U	72,120
Indirect Labor ($4000+ $1.70q)	11,650	480	F	11,310	480	F	10,830
Utilities (5600+$0.50q)	7,850	490	F	7,750	490	U	8,240
Supplies ($1600+ $0.40q)	3,400	290	F	3,320	290	U	3,610
Equipment Depreciation ($18,200+$2.4q)	29,000	0	F	28,520	0		28,520
Factory Rent ($8,400)	8,400	400	0	8,400	400	U	8,800
Property taxes ($2,900)	2,900	0	0	2,900	0		2,900
Factory administration ($13,100 + $0.80q)	16,700	610	F	16,540	610	F	15,930
Total expense	153,700	4,440	F	149,260	1,690	U	150,950