Question

1.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	$16.20q
Indirect labor	$4,500 + $1.80q
Utilities	$5,200 + $0.60q
Supplies	$1,700 + $0.30q
Equipment depreciation	$18,800 + $3.00q
Factory rent	$8,300
Property taxes	$2,500
Factory administration	$13,000 + $0.80q

The Production Department planned to work 4,500 labor-hours in March; however, it actually worked 4,300 labor-hours during the month. Its actual costs incurred in March are listed below:

	Actual Cost Incurred in March
Direct labor	$	71,220
Indirect labor	$	11,780
Utilities	$	8,290
Supplies	$	3,260
Equipment depreciation	$	31,700
Factory rent	$	8,700
Property taxes	$	2,500
Factory administration	$	15,830

Required:

1. Make the Production Department’s planning budget for the month.

2. Make the Production Department’s flexible budget for the month.

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

Answer 1

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