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: Cost FormulasDirect labor$15.80qIndirect labor$8,200 + $1.60qUtilities$6,400 + $0.80qSupplies$1,100 + $0.40qEquipment depreciation$23,000 + $3.70qFactory rent$8,400Property taxes$2,100Factory administration$11,700 + $1.90q The Production Department planned to work 8,000 labor-hours in March; however, it actually worked 8,400 labor-hours during the month. Its actual costs incurred in March are listed below: Actual Cost Incurred in MarchDirect labor$ 134,730Indirect labor$ 19,860Utilities$ 14,570Supplies$ 4,980Equipment depreciation$ 54,080Factory rent$ 8,700Property taxes$ 2,100Factory administration$ 26,470 1. Prepare the Production Department’s planning budget for the month.2. Prepare the Production Department’s flexible budget for the month.3. Calculate the spending variances for all expense items. Packaging Solutions Corporation manufactures and sells a wide variety of packaging products. Performance reports are preparedmonthly for each department. The planning budget and flexible budget for the Production Department are based on the followingformulas, where q is the number of labor-hours worked in a month:Direct laborIndirect laborUtilitiesSuppliesEquipment depreciationFactory rentProperty taxesFactory administrationDirect laborIndirect laborUtilitiesCost Formulas$15.809$8,200+ $1.60q$6,400+ $0.80q$1,100 + $0.40q$23,000+ $3.70q$8,400The Production Department planned to work 8,000 labor-hours in March; however, it actually worked 8,400 labor-hours during themonth. Its actual costs incurred in March are listed below:SuppliesEquipment depreciationFactory rentProperty taxesFactory administration$2,100$11,700+ $1.909Actual CostIncurred inMarch$ 134,730$ 19,860$ 14,570$4,980$ 54,080$8,700$ 2,100$ 26,470Required:1. Prepare the Production Department's planning budget for the month.2. Prepare the Production Department's flexible budget for the month.3. Calculate the spending variances for all expense items. Packaging Solutions CorporationProduction Department Planning BudgetFor the Month Ended March 31Direct laborIndirect laborUtilitiesSuppliesEquipment depreciationFactory rentProperty taxesFactory administrationTotal expenseLabor-hoursDirect laborIndirect laborUtilitiesSuppliesEquipment depreciationFactory rentProperty taxesFactory administrationTotal expense$Packaging Solutions CorporationProduction Department Flexible BudgetFor the Month Ended March 31Direct laborIndirect laborUtilitiesSuppliesEquipment depreciationFactory rentProperty taxesFactory administration0 Total expensePackaging Solutions CorporationSpending VariancesFor the Month Ended March 31ActualResults8,400$ 134,73019,86014,5704,98054,0808,7002,10026,470$ 265,490Spending Variances$FlexibleBudget

The variance is the difference between the actual and standard production data. The spending…

Answered: Packaging Solutions Corporation…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter9: Profit Planning And Flexible Budgets

Section: Chapter Questions

Problem 48BEB: Performance Report Based on Budgeted and Actual Levels of Production Balboa Company budgeted...

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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:

	Cost Formulas
Direct labor	$15.80q
Indirect labor	$8,200 + $1.60q
Utilities	$6,400 + $0.80q
Supplies	$1,100 + $0.40q
Equipment depreciation	$23,000 + $3.70q
Factory rent	$8,400
Property taxes	$2,100
Factory administration	$11,700 + $1.90q

The Production Department planned to work 8,000 labor-hours in March; however, it actually worked 8,400 labor-hours during the month. Its actual costs incurred in March are listed below:

	Actual Cost Incurred in March
Direct labor	$ 134,730
Indirect labor	$ 19,860
Utilities	$ 14,570
Supplies	$ 4,980
Equipment depreciation	$ 54,080
Factory rent	$ 8,700
Property taxes	$ 2,100
Factory administration	$ 26,470

1. Prepare the Production Department’s planning budget for the month.

2. Prepare the Production Department’s flexible budget for the month.

3. Calculate the spending variances for all expense items.

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
Direct labor
Indirect labor
Utilities
Cost Formulas
$15.809
$8,200+ $1.60q
$6,400+ $0.80q
$1,100 + $0.40q
$23,000+ $3.70q
$8,400
The Production Department planned to work 8,000 labor-hours in March; however, it actually worked 8,400 labor-hours during the
month. Its actual costs incurred in March are listed below:
Supplies
Equipment depreciation
Factory rent
Property taxes
Factory administration
$2,100
$11,700+ $1.909
Actual Cost
Incurred in
March
$ 134,730
$ 19,860
$ 14,570
$4,980
$ 54,080
$8,700
$ 2,100
$ 26,470
Required:
1. Prepare the Production Department's planning budget for the month.
2. Prepare the Production Department's flexible budget for the month.
3. Calculate the spending variances for all expense items.

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
Labor-hours
Direct labor
Indirect labor
Utilities
Supplies
Equipment depreciation
Factory rent
Property taxes
Factory administration
Total expense
$
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
0 Total expense
Packaging Solutions Corporation
Spending Variances
For the Month Ended March 31
Actual
Results
8,400
$ 134,730
19,860
14,570
4,980
54,080
8,700
2,100
26,470
$ 265,490
Spending Variances
$
Flexible
Budget

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