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	$4,200 + $2.10q
Utilities	$5,500 + $0.80q
Supplies	$1,500 + $0.20q
Equipment depreciation	$18,700 + $3.10q
Factory rent	$8,200
Property taxes	$2,800
Factory administration	$13,100 + $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	$	70,040
Indirect labor	$	12,620
Utilities	$	9,410
Supplies	$	2,590
Equipment depreciation	$	31,720
Factory rent	$	8,600
Property taxes	$	2,800
Factory administration	$	14,970

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 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 12,620 Utilities 9,410 Supplies 2,590 Equipment depreciation 31,720 Factory rent 8,600 Property taxes 2,800 Factory administration 14,970 Total expense $152,750

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

Answer 1