Packaging Solutions Corporation manufactures and sells a wide variety of packagi
ID: 2476068 • 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 laborhours worked in a month:
Direct labor $16.50q
Indirect labor $ 4,100 + $ 1.90q
Utilities $ 5,400 + $ 0.30q
Supplies $ 1,300 + $ 0.30q
Equipment depreciation $18,400 + $ 2.50q Factory rent $8,500
Property taxes $2,700
Factory administration $13,200 + $ 0.50q
The actual costs incurred in March in the Production Department are listed below: Actual Cost
Incurred in
March
Direct labor
$ 65,970
Indirect labor
$ 11,070
Utilities
$ 7,020
Supplies
$ 2,740
Equipment depreciation
$ 28,150
Factory rent
$ 8,900
Property taxes
$ 2,700
Factory administration
$ 14,480
Required:
The company had budgeted for an activity level of 4,100 laborhours 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
The company actually worked 3,900 laborhours 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
Calculate the spending variances for all expense items. (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
Direct labor
Indirect labor
Utilities
Supplies
Equipment depreciation
Factory rent
Property taxes
Factory administration
Total expense
Explanation / Answer
Packaging Solutions Corporation Production Department Planning Budget For the Month Ended March 31
Budgeted =4,100 labor hours
Particulars ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::Amount
Direct labor:::::::::::::::::::::::::::::::::::::::$16.50*:4,100=$67,650
Indirect labor::::::::::::::::::::$ 4,100 + $ 1.90*4,100 =$11,890
Utilities::::::::::::::::::::::::::::::$ 5,400 + $ 0.30*4,100 =$6630
Supplies::::::::::::::::::::::::::$ 1,300 + $ 0.30*4,100 =$2,530
Equipment depreciation:$18,400 + $ 2.50* 4,100 =$28,650
Factory rent::::::::::::::::::::::::::::::::::::::::::::::::::::::::::=$8,500
Property taxes:::::::::::::::::::::::::::::::::::::::::::::::::::::=$2,700
Factory administration:::::$13,200 + $ 0.50 *4,100 =$15,250
_____________________________________________
Total expense:::::::::::::::::::::::::::::::::::::::::::::::::::$143,800
___________________________________________________________________________________
Packaging Solutions Corporation Production Department Flexible Budget For the Month Ended March 31
Flexible budget actually worked 3,900 laborhours
Particulars ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::Amount
Direct labor:::::::::::::::::::::::::::::::::::::::$16.50*:3,900=$64,350
Indirect labor:::::::::::::::::::$ 4,100 + $ 1.90* 3,900=$11,510
Utilities::::::::::::::::::::::::::::$ 5,400 + $ 0.30*3,900=$6570
Supplies::::::::::::::::::::::::::$ 1,300 + $ 0.30*3,900=$2,470
Equipment depreciation:$18,400 + $ 2.50*3900=$28,150
Factory rent::::::::::::::::::::::::::::::::::::::::::::::::::::::::::=$8,500
Property taxes:::::::::::::::::::::::::::::::::::::::::::::::::::::=$2,700
Factory administration:::$13,200 + $ 0.50*3900=$15,150
_______________________________________________
Total expense:::::::::::::::::::::::::::::::::::::::::::::::::::::$139,400
_______________________________________________
__________________________________________________________________________________
Packaging Solutions Corporation Production Department Flexible Budget Performance Report For the Month Ended March 31
Spending Variances
Particulars :::::::::::::::::::::::::Flexible Budget::::::Actual ::::::::::::::Spending Variances
Direct labo:::::::::::::::::::::::::::::$64,350:::::::::::::$65,970:::::::::::::::::$1,620(U)
Indirect labor::::::::::::::::::::::::::$11,510::::::::::::$11,070::::::::::::::::::$4,40(F)
Utilities:::::::::::::::::::::::::::::::::::::$6570:::::::::::::::$7,020::::::::::::::::::$450(U)
Supplies::::::::::::::::::::::::::::::::::$2,470:::::::::::::::$2,740::::::::::::::::::$270(U)
Equipment depreciation:::::::::$28,150:::::::::::::$ 28,150::::::::::::::::$0
Factory rent:::::::::::::::::::::::::::$8,500::::::::::::::::$8,900::::::::::::::::::::$400(U)
Property taxes:::::::::::::::::::::::$2,700::::::::::::::::$2,700::::::::::::::::::::0
Factory administration::::::::$15,150:::::::::::::::::$14,480::::::::::::::::::$670(F)
___________________________________________________________________
Total expense:::::::::::::::::::::::::$139,400::::::::::::::::::::$141,030::::::::::::::::$1,630(U)
___________________________________________________________________
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