In: Accounting
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 | $16.40q |
Indirect labor | $4,700 + $1.60q |
Utilities | $5,600 + $0.70q |
Supplies | $1,300 + $0.30q |
Equipment depreciation | $18,600 + $2.50q |
Factory rent | $8,400 |
Property taxes | $2,900 |
Factory administration | $13,400 + $0.70q |
The Production Department planned to work 4,200 labor-hours in March; however, it actually worked 4,000 labor-hours during the month. Its actual costs incurred in March are listed below:
Actual Cost Incurred in March | |||
Direct labor | $ | 67,200 | |
Indirect labor | $ | 10,600 | |
Utilities | $ | 8,930 | |
Supplies | $ | 2,770 | |
Equipment depreciation | $ | 28,600 | |
Factory rent | $ | 8,800 | |
Property taxes | $ | 2,900 | |
Factory administration | $ | 15,570 | |
Required:
1. Prepare the Production Department’s planning budget for the month.
2. Prepare the Production Department’s flexible budget for the month.
3. Calculate the spending variances for all expense items.