Packaging Solutions Corporation manufactures and sells a wide variety of packagi
ID: 2469397 • Letter: P
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 $ 16.40 q Indirect labor $ 4,300 + $ 2.00 q Utilities $ 5,200 + $ 0.80 q Supplies $ 1,400 + $ 0.20 q Equipment depreciation $ 18,400 + $ 2.50 q Factory rent $ 8,200 Property taxes $ 2,700 Factory administration $ 13,100 + $ 0.50 q The actual costs incurred in March in the Production Department are listed below: Actual Cost Incurred in March Direct labor $ 67,200 Indirect labor $ 11,880 Utilities $ 8,950 Supplies $ 2,450 Equipment depreciation $ 28,400 Factory rent $ 8,600 Property taxes $ 2,700 Factory administration $ 14,430 Required: 1. The company had budgeted for an activity level of 4,200 labor-hours in March. Complete the Production Department’s planning budget for the month.
Explanation / Answer
SOLUTION :
Planning budget
Variable cost per direct labour hour
Fixed cost
Total*
Direct labor
16.40
68,880
Indirect labor
2.00
4,300
12,700
Utilities
0.80
5,200
8,560
Supplies
0.20
1,400
2,240
Equipment depreciation
2.50
18,400
28,900
Factory rent
8,200
8,200
Property taxes
2,700
2,700
Factory administration
0.50
13,100
15,200
Total
22.40
53,300
147,380
Total = (4200 hours*variable cost per hour)+ fixed cost
Planning budget
Variable cost per direct labour hour
Fixed cost
Total*
Direct labor
16.40
68,880
Indirect labor
2.00
4,300
12,700
Utilities
0.80
5,200
8,560
Supplies
0.20
1,400
2,240
Equipment depreciation
2.50
18,400
28,900
Factory rent
8,200
8,200
Property taxes
2,700
2,700
Factory administration
0.50
13,100
15,200
Total
22.40
53,300
147,380
Total = (4200 hours*variable cost per hour)+ fixed cost
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