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:

Direct labor				$	16.20	q
Indirect labor	$	4,700	+	$	1.90	q
Utilities	$	5,300	+	$	0.50	q
Supplies	$	1,500	+	$	0.20	q
Equipment depreciation	$	18,300	+	$	3.10	q
Factory rent				$	8,400
Property taxes				$	2,500
Factory administration	$	13,200	+	$	0.80	q

  

The actual costs incurred in March in the Production Department are listed below:

  

	Actual Cost Incurred in March
Direct labor	$	64,740
Indirect labor	$	11,670
Utilities	$	7,740
Supplies	$	2,530
Equipment depreciation	$	30,390
Factory rent	$	8,800
Property taxes	$	2,500
Factory administration	$	15,710

Required:
1.	The company had budgeted for an activity level of 4,100 labor-hours in March. Complete the Production Department’s planning budget for the month.
	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 $0

     

2.

The company actually worked 3,900 labor-hours in March. Complete the Production Department’s flexible budget for the month 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 $0 3. Complete the Production Department’s flexible budget performance report for March, including both the spending and activity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Packaging Solutions Corporation Production Department Flexible Budget Performance Report For the Month Ended March 31 Spending Variances Activity Variances Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration Total expense

  

Answer 1

A)

packaging Solutions Corporation
Production department Planning Budget
Fot the month ended Marh-31
Direct labor	66420
Indirect labor	12490
Utilities	7350
Supplies	2320
Equipment depreciation	31010
Factory rent	8400
Property taxes	2500
Factory administration	3280
Total Expanses	133770

______________________________________

b)

packaging Solutions Corporation
Production department Flexible Budget
Fot the month ended Marh-31
Direct labor	63180
Indirect labor	12110
Utilities	7250
Supplies	2280
Equipment depreciation	30390
Factory rent	8400
Property taxes	2500
Factory administration	3120
Total Expanses	129230

___________________________________________

c)

packaging Solutions Corporation
Production Department Flexible Budget Performance Report
Fot the month ended Marh-31
	Actua Result	Spending Variances		Flexibet Budget	Activity Variances		Planning Budget
Labor Hours	3900			3900			4100
Direct labor	64740	1560	U	63180	3240	F	66420
Indirect labor	11,670	440	F	12110	380	F	12490
Utilities	7,740	490	U	7250	100	F	7350
Supplies	2,530	250	U	2280	40	F	2320
Equipment depreciation	30,390	0		30390	620	F	31010
Factory rent	8,800	400	U	8400	0		8400
Property taxes	2,500	0		2500	0		2500
Factory administration	15710	12590	U	3120	160	F	3280
Total Expanses	144080	14850	U	129230	4540	F	133770

Working notes for the above answer is as inder