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	$16.20q
Indirect labor	$4,200 + $1.80q
Utilities	$5,700 + $0.80q
Supplies	$1,400 + $0.20q
Equipment depreciation	$18,300 + $3.10q
Factory rent	$8,400
Property taxes	$3,000
Factory administration	$13,600 + $0.60q

The Production Department planned to work 4,400 labor-hours in March; however, it actually worked 4,200 labor-hours during the month. Its actual costs incurred in March are listed below:

	Actual Cost Incurred in March
Direct labor	$	69,600
Indirect labor	$	11,300
Utilities	$	9,610
Supplies	$	2,490
Equipment depreciation	$	31,320
Factory rent	$	8,800
Property taxes	$	3,000
Factory administration	$	15,470

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.

Prepare the Production Department’s flexible budget for the month.

	Packaging Solutions Corporation Production Department Flexible Budget For the Month Ended March 31 Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration Total expense

Prepare the Production Department’s flexible budget performance report for March, including both the spending and activity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

	Packaging Solutions Corporation Production Department Flexible Budget Performance Report For the Month Ended March 31 Actual Results Flexible Budget Planning Budget Labor-hours 4,200 Direct labor $69,600 Indirect labor 11,300 Utilities 9,610 Supplies 2,490 Equipment depreciation 31,320 Factory rent 8,800 Property taxes 3,000 Factory administration 15,470 Total expense $151,590

Answer 1

Part-1- Planning Budget
Particulars	Amount
Hour Worked	4400
Direct Labour	$71,280.00
Indirect Labour	$12,120.00
Utilities	$9,220.00
Supplies	$2,280.00
Equipment Depreciation	$31,940.00
Factory Rent	$8,400.00
Property Tax	$3,000.00
Factory Administration	$16,240.00
Tototal Expense	$154,480.00
Part-2- Flexible Budget
Particulars	Amount
Hour Worked	4200
Direct Labour	$68,040.00
Indirect Labour	$11,760.00
Utilities	$9,060.00
Supplies	$2,240.00
Equipment Depreciation	$31,320.00
Factory Rent	$8,400.00
Property Tax	$3,000.00
Factory Administration	$16,120.00
Total Expense	$149,940.00

Packaging Solutions Corporation
Flexible Budget Performance Report
Particulars	Actual	Revenue and spending variances		Flexible Budget
Hour Worked	4200			4200
Direct Labour	$69,600.00	$1,560.00	UF	$68,040.00
Indirect Labour	$11,300.00	$460.00	F	$11,760.00
Utilities	$9,610.00	$550.00	UF	$9,060.00
Supplies	$2,490.00	$250.00	UF	$2,240.00
Equipment Depreciation	$31,320.00	$0.00	None	$31,320.00
Factory Rent	$8,800.00	$400.00	UF	$8,400.00
Property Tax	$3,000.00	$0.00	None	$3,000.00
Factory Administration	$15,470.00	$650.00	F	$16,120.00
Tototal Expense	$151,590.00	$1,650.00	UF	$149,940.00