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 $16.50q $ 4,600+S 1.60q $ 5,000 +$ 0.70q $ 1,300+$ 0.40q $18,000 2.60q Factory rent Property taxes Factory administration $8,200 $2,600 $13,400+$ 0.70q The actual costs incurred in March in the Production Department are listed below Actual Cost Incurred in March $ 65,970 $ 10,340 $ 8,260 $ 3,150 $ 28,140 $ 8,600 $ 2,600 $ 15,500 Direct labor Indirect labor Utilities Supplies Factory rent Property taxes Factory administration Required 1. The company had budgeted for an activity level of 4,100 labor-hours 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 Factory rent Property taxes Factory administration Total expense

Explanation / Answer

Production department Planning Budget

Direct labor

4100

16.5

67650

indirect labor

4600+(4100*1.6)

11160

utilitize

5000+(4100*.70)

7870

supplies

1300+(4100*.4)

2940

equipment depreciation

18000+(4100*2.6)

28660

factory rent

8200

property taxes

2600

factory administration

13400+(4100*.7)

16270

total expense

145350

Production department flexible Budget

Direct labor

3900

16.5

64350

indirect labor

4600+(3900*1.6)

10840

utilitize

5000+(3900*.70)

7730

supplies

1300+(3900*.4)

2860

equipment depreciation

18000+(3900*2.6)

28140

factory rent

8200

property taxes

2600

factory administration

13400+(3900*.7)

16130

total expense

140850

Spending variance

Actual

Flexible Budget

spending variance =actual- flexible

Fav or Unfav

Direct labor

65970

64350

1620

U

indirect labor

10340

10840

-500

F

utilitize

8260

7730

530

U

supplies

3150

2860

290

U

equipment depreciation

28140

28140

0

No effect

factory rent

8600

8200

400

U

property taxes

2600

2600

0

No effect

factory administration

15500

16130

-630

F

total expense

142560

140850

1710

U

Production department Planning Budget

Direct labor

4100

16.5

67650

indirect labor

4600+(4100*1.6)

11160

utilitize

5000+(4100*.70)

7870

supplies

1300+(4100*.4)

2940

equipment depreciation

18000+(4100*2.6)

28660

factory rent

8200

property taxes

2600

factory administration

13400+(4100*.7)

16270

total expense

145350

Production department flexible Budget

Direct labor

3900

16.5

64350

indirect labor

4600+(3900*1.6)

10840

utilitize

5000+(3900*.70)

7730

supplies

1300+(3900*.4)

2860

equipment depreciation

18000+(3900*2.6)

28140

factory rent

8200

property taxes

2600

factory administration

13400+(3900*.7)

16130

total expense

140850

Spending variance

Actual

Flexible Budget

spending variance =actual- flexible

Fav or Unfav

Direct labor

65970

64350

1620

U

indirect labor

10340

10840

-500

F

utilitize

8260

7730

530

U

supplies

3150

2860

290

U

equipment depreciation

28140

28140

0

No effect

factory rent

8600

8200

400

U

property taxes

2600

2600

0

No effect

factory administration

15500

16130

-630

F

total expense

142560

140850

1710

U

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