Packaging Solutions Corporation manufactures and sells a wide variety of packagi
ID: 2392452 • 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 $ 16.10 q Indirect labor $ 4,200 + $ 1.60 q Utilities $ 5,600 + $ 0.30 q Supplies $ 1,600 + $ 0.20 q Equipment depreciation $ 18,500 + $ 2.70 q Factory rent $ 8,500 Property taxes $ 3,000 Factory administration $ 13,600 + $ 0.60 q The actual costs incurred in March in the Production Department are listed below: Actual Cost Incurred in March Direct labor $ 67,550 Indirect labor $ 10,260 Utilities $ 7,280 Supplies $ 2,670 Equipment depreciation $ 29,570 Factory rent $ 8,900 Property taxes $ 3,000 Factory administration $ 15,410
Required: 1. The company had budgeted for an activity level of 4,300 labor-hours in March. Complete the Production Department’s planning budget for the month.
2. The company actually worked 4,100 labor-hours in March. Complete the Production Department’s flexible budget for the month.
3. 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.)
Explanation / Answer
1. Planning budget for 4,300 labor-hours Direct labor 69230 Indirect labor 11080 Utilities 6890 Supplies 2460 Equipment depreciation 30110 Factory Rent 8500 Property Taxes 3000 Factory administration 16180 Total 147450 2. Flexible budget for 4,100 labor-hours Direct labor 66010 Indirect labor 10760 Utilities 6830 Supplies 2420 Equipment depreciation 29570 Factory Rent 8500 Property Taxes 3000 Factory administration 16060 Total 143150 3. Spending Variances Cost item Flexible Budget Actual Spending variances Direct labor 66010 67550 1540 U Indirect labor 10760 10260 500 F Utilities 6830 7280 450 U Supplies 2420 2670 250 U Equipment depreciation 29570 29570 0 None Factory Rent 8500 8900 400 U Property Taxes 3000 3000 0 None Factory administration 16060 15410 650 F Total 143150 144640 1490 U
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