Question

1. 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	$16.60q
Indirect labor	$4,300 + $1.50q
Utilities	$5,200 + $0.30q
Supplies	$1,400 + $0.30q
Equipment depreciation	$18,700 + $2.60q
Factory rent	$8,100
Property taxes	$2,500
Factory administration	$13,800 + $0.90q

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	$	68,040
Indirect labor	$	9,780
Utilities	$	6,850
Supplies	$	2,870
Equipment depreciation	$	29,100
Factory rent	$	8,500
Property taxes	$	2,500
Factory administration	$	16,810

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.

2. Ray Company provided the following excerpts from its Production Department’s flexible budget performance report. (Round "rate per hour" answers to 2 decimal places. 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.)

3. Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers—the number of cruises and the number of passengers—that it uses in its budgeting and performance reports. The company publishes a schedule of day cruises that it may supplement with special sailings if there is sufficient demand. Up to 86 passengers can be accommodated on the tour boat. Data concerning the company’s cost formulas appear below:

	Fixed Cost per Month			Cost per Cruise			Cost per Passenger
Vessel operating costs	$	6,700		$	478.00		$	3.40
Advertising	$	2,700
Administrative costs	$	5,500		$	35.00		$	1.50
Insurance	$	3,100

For example, vessel operating costs should be $6,700 per month plus $478.00 per cruise plus $3.40 per passenger. The company’s sales should average $29.00 per passenger. In July, the company provided 57 cruises for a total of 3,100 passengers.

Required:

Prepare the company’s flexible budget for July.

Answer 1

1. Prepare the Production Department’s planning budget for the month.

Packaging Solutions Corporation
Production Department Planning Budget
For the Month Ended March 31
	Planning budget
Budgeted labor-hours	4200
Direct labor ($16.60q)	69720
Indirect labor ($4,300 + $1.50q)	10600
Utilities ($5,200 + $0.30q)	6460
Supplies ($1,400 + $0.30q)	2660
Equipment depreciation     ($18,700 + $2.60q)	29620
Factory rent    (8100.)	8100
Property taxes   (2500)	2500
Factory administration ($13,800 + $0.90q)	17580
Total expense	147240

__________________________________________________________________

2. Prepare the Production Department’s flexible budget for the month.

The flexible budget appears below. Like the planning budget, this report does not include revenue or net operating income because the production department is a cost center that does not have any revenue

Packaging Solutions Corporation
Production Department Flexible Budget
For the Month Ended March 31
	Planning budget
Budgeted labor-hours	4000
Direct labor ($16.60q)	66400
Indirect labor ($4,300 + $1.50q)	10300
Utilities ($5,200 + $0.30q)	6400
Supplies ($1,400 + $0.30q)	2600
Equipment depreciation     ($18,700 + $2.60q)	29100
Factory rent    (8100.)	8100
Property taxes   (2500)	2500
Factory administration ($13,800 + $0.90q)	17400
Total expense	142800

________________________________________________________________

3

The flexible budget performance report appears below. This report does not include revenue or net operating income because the production department is a cost center that does not have any revenue

Packaging Solutions Corporation
Production Department Flexible Budget Performance Report
For the Month Ended March 31
	Actaul result	Spending Variances		Flexible Budget	Activity Variances		Planning Budget
Budgeted labor-hours	4000			4000			4200
Direct labor ($16.60q)	68040	1640	U	66400	3320	F	69720
Indirect labor ($4,300 + $1.50q)	9780	520	F	10300	300	F	10600
Utilities ($5,200 + $0.30q)	6850	450	U	6400	60	F	6460
Supplies ($1,400 + $0.30q)	2870	270	U	2600	60	F	2660
Equipment depreciation     ($18,700 + $2.60q)	29100	0		29100	520	F	29620
Factory rent    (8100.)	8500	400	U	8100	0	F	8100
Property taxes   (2500)	2500	0		2500	0	F	2500
Factory administration ($13,800 + $0.90q)	16810	590	F	17400	180	F	17580
Total expense	144450	1650	U	142800	4440	F	147240

Working notes for the above answer is as under

Note:

As this question has multiple question so as per guideline I have answered 1 question