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 $4,000 + $1.40q Utilities $5,100 + $0.40q Supplies $1,700 + $0.30q Equipment depreciation $18,800 + $2.70q Factory rent $8,500 Property taxes $2,500 Factory administration $13,500 + $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 $ 9,340 Utilities $ 7,250 Supplies $ 3,230 Equipment depreciation $ 30,140 Factory rent $ 8,900 Property taxes $ 2,500 Factory administration $ 15,370 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.

Answer 1