Packaging Solutions Corporation manufactures and sells a wide variety of packagi

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:

The Production Department planned to work 4,100 labor-hours in March; however, it actually worked 3,900 labor-hours during the month. Its actual costs incurred in March are listed below:

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.

Cost Formulas Direct labor $16.40q Indirect labor $4,100 + $1.70q Utilities $5,200 + $0.90q Supplies $1,600 + $0.30q Equipment depreciation $18,300 + $2.90q Factory rent $8,300 Property taxes $2,500 Factory administration $13,600 + $0.60q

Explanation / Answer

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

4100 Hours Direct labor 67240 Indirect labour 11070 Utilities 8890 Supplies 2830 Equipment depreciation 30190 Factory rent 8300 Property tax 2500 Factory administration 16060 Total 147080

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