Packaging Solutions Corporation manufactures and sells a wid

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:

The Production Department planned to work 4,100 labor-hours in March; however, it actually worked 3,900 labor-hours during the month. Its actual costs incurred in March are listed below:

Required:

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

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

3. Prepare the Production Department’s flexible budget performance report for March, including both the spending and activity variances.

	Cost Formulas
Direct labor	$16.60q
Indirect labor	$4,300 + $1.40q
Utilities	$5,100 + $0.30q
Supplies	$1,600 + $0.40q
Equipment depreciation	$18,700 + $2.50q
Factory rent	$8,400
Property taxes	$2,500
Factory administration	$13,600 + $0.60q

Solution

Planning Budget(4100 Hrs) Direct labor 68060 Indirect labor 10040 Utilities 6330 Supplies 3240 Equipment depreciation 28950 Factory rent 8,400 Property taxes 2,500 Factory administration 16060 143580 Flexible Budget (3900 Hrs) Direct labor 64740 Indirect labor 9760 Utilities 6270 Supplies 3160 Equipment depreciation 28450 Factory rent 8,400 Property taxes 2,500 Factory administration 15940 139220 flexible budget performance report Spending Variance Activity variances Actual Spending Variance Flexible Budget Planning Budget Direct labor 66,380 1,640 U Direct labor 64740 3,320 F Direct labor 68060 Indirect labor 9,220 540 F Indirect labor 9760 280 F Indirect labor 10040 Utilities 6,720 450 U Utilities 6270 60 F Utilities 6330 Supplies 3,450 290 U Supplies 3160 80 F Supplies 3240 Equipment depreciation 28,450 0 None Equipment depreciation 28450 500 F Equipment depreciation 28950 Factory rent 8,800 400 U Factory rent 8,400 0 None Factory rent 8,400 Property taxes 2,500 0 None Property taxes 2,500 0 None Property taxes 2,500 Factory administration 15,290 650 F Factory administration 15940 120 F Factory administration 16060 1,40,810 1,590 U 139220 4360 F 143580