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: Cost Formulas Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration $16.40g $4,200 + $2.00g $5,100 + $0.40g $1,200 + $0.20g $18,500 $2.80g $8,300 $2,500 $13,600 $0.60g 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: Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration Actual Cost Incurred in March $ 70,480 12,180 $ 7,250 $ 2,290 $30,260 $ 8,700 $ 2,500 15,470 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.

Explanation / Answer

1.

2.

3.

Packaging Solutions Corporation Production Department Planning Budget For the Month Ended March 31 Labour hours 4400 Direct labor 72160 Indirect labor 13000 Utilities 6860 Supplies 2080 Equipment depreciation 30820 Factory rent 8300 Property taxes 2500 Factory administration 16240 Total expense 151960

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