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 $16.40q $ 4,4001.50q $ 5,200 0.60q $ 1,600$0.10q $18,200+$ 2.80q $8,600 $2,500 $13,300+$ 0.90q 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 $70,480 $ 10,180 $ 8,230 $ 2,250 $29,960 $ 9,000 $2,500 $16,490 Required: 1. The company had budgeted for an activity level of 4,400 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 Indirectlabor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration Total expense

Explanation / Answer

The company had budgeted for an activity level of 4,400 labor-hours in March.
Budgeted labor-hours (q) 4,400
Direct labor ($16.40q) $72,160,
Indirect labor ($4,400 + $1.50q) 11,000*
Utilities ($5,200 + $0.60q) 7,840
Supplies ($1,600 + $0.10q) 2,040
Equipment depreciation ($18,200 + $2.80q) 30,520
Factory rent ($8,600) 8,600
Property taxes ($2500) 2,500
Factory administration ($13,300 + $0.90q) 17,260

Total expense $151,920        

The company actually worked 4,200 labor-hours in March.
Actual labor-hours (q) 4,200
Direct labor ($16.40q) $68,880
Indirect labor ($4,400 + $1.50q) 10,700*
Utilities ($5,200 + $0.60q) 7,720
Supplies ($1,600 + $0.10q) 2,020
Equipment depreciation ($18,200 + $2.80q) 29,960
Factory rent ($8,600) 8,600
Property taxes ($2500) 2,500
Factory administration ($13,300 + $0.90q) 17,080

Total expense $147,460        

Spending variance

Direct labor ($16.40q) $1,600U
Indirect labor ($4,400 + $1.50q) 520F
Utilities ($5,200 + $0.60q) 510U
Supplies ($1,600 + $0.10q) 230
Equipment depreciation ($18,200 + $2.80q) 0
Factory rent ($8,600) 0
Property taxes ($2500) 0
Factory administration ($13,300 + $0.90q) 590F

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