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	$4,100 + $2.00q
Utilities	$5,300 + $0.80q
Supplies	$1,600 + $0.10q
Equipment depreciation	$18,700 + $2.50q
Factory rent	$8,500
Property taxes	$2,600
Factory administration	$13,200 + $0.70q

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	$	70,040
Indirect labor	$	12,080
Utilities	$	9,210
Supplies	$	2,250
Equipment depreciation	$	29,200
Factory rent	$	8,900
Property taxes	$	2,600
Factory administration	$	15,510

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.

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

	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

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 $70,040 Indirect labor 12,080 Utilities 9,210 Supplies 2,250 Equipment depreciation 29,200 Factory rent 8,900 Property taxes 2,600 Factory administration 15,510 Total expense $149,790

Answer 1