Question

In: Accounting

Packaging Solutions Corporation manufactures and sells a wide variety of packaging products. Performance reports are prepared...

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 $15.80q
Indirect labor $8,200 + $1.60q
Utilities $6,400 + $0.80q
Supplies $1,100 + $0.40q
Equipment depreciation $23,000 + $3.70q
Factory rent $8,400
Property taxes $2,100
Factory administration $11,700 + $1.90q

The Production Department planned to work 8,000 labor-hours in March; however, it actually worked 8,400 labor-hours during the month. Its actual costs incurred in March are listed below:

Actual Cost Incurred in March
Direct labor $ 134,730
Indirect labor $ 19,860
Utilities $ 14,570
Supplies $ 4,980
Equipment depreciation $ 54,080
Factory rent $ 8,700
Property taxes $ 2,100
Factory administration $ 26,470

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

Solutions

Expert Solution

Planning Budget
Number of DLH 8000
Direct labor 126400
Indirect labor 21000
Utilities 12800
Supplies 4300
Equip. Depreciation 52600
Factory rent 8400
Property taxes 2100
Factory admin 26900
Total cost 254500
Flexible Budget
Number of DLH 8400
Direct labor 132720
Indirect labor 21640
Utilities 13120
Supplies 4460
Equip. Depreciation 54080
Factory rent 8400
Property taxes 2100
Factory admin 27660
Total cost 264180
Flexible Budget Performance report
Actual Revenue and Spending Flexible Activity Variance Planned
Number of DLH 8400 8400 8000
Direct labor 134730 2010 U 132720 6320 U 126400
Indirect labor 19860 1780 F 21640 640 U 21000
Utilities 14570 1450 U 13120 320 U 12800
Supplies 4980 520 U 4460 160 U 4300
Equip. Depreciation 54080 0 54080 1480 U 52600
Factory rent 8700 300 U 8400 0 8400
Property taxes 2100 0 2100 0 2100
Factory admin 26470 1190 F 27660 760 U 26900
Total cost 265490 1310 U 264180 9680 U 254500

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