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 Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration $16.60q $ 4,300 $ 1.50q $5,700 $ 0.60q $1,400 S 0.30q $18,600+$ 3.00q $8,400 $2,600 $13,500 S 0.50q The actual costs incurred in March in the Production Department are listed below: Actual Cost Incurred in Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration March $ 64,720 $9,480 $ 8,490 $2,810 $ 30,000 $ 8,800 $2,600 $14,730

Explanation / Answer

1 Planning budget Direct labor 66400 =4000*16.6 Indirect labor 10300 =4300+(4000*1.5) Utilities 8100 =5700+(4000*0.6) Supplies 2600 =1400+(4000*0.3) Equipment depreciation 30600 =18600+(4000*3) Factory rent 8400 Property taxes 2600 Factory administration 15500 =13500+(4000*0.5) Total expenses 144500 2 Flexible budget Direct labor 63080 =3800*16.6 Indirect labor 10000 =4300+(3800*1.5) Utilities 7980 =5700+(3800*0.6) Supplies 2540 =1400+(3800*0.3) Equipment depreciation 30000 =18600+(3800*3) Factory rent 8400 Property taxes 2600 Factory administration 15400 =13500+(3800*0.5) Total expenses 140000 3 Spending variances Direct labor 1640 U Indirect labor 520 F Utilities 510 U Supplies 270 U Equipment depreciation 0 None Factory rent 400 U Property taxes 0 None Factory administration 670 F Total expenses 1630 U

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