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: Utilities Cost Formulas $16.60q $4,600 + $2.10q $5,700 +$0.50q Direct labor Indirect labor Supplies $1,300 + $0.10q Equipment depreciation $18,100 + $2.40q Factory rent $8,100 $3,000 $13,400 + $0.70q Property taxes Factory administration 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: Direct labor Indirect labor Utilities Actual Cost Incurred in March $ 66,380 $ 12,390 $ 8,140 Factory rent Supplies $ 1,920 Equipment depreciation $ 27,460 $ 8,500 $ 3,000 $ 15,500 Property taxes Factory administration Required: 1. Prepare the Production Department's planning budget for the month. 2. Prepare the Production Department's flexible budget for the month. ences 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: Utilities Cost Formulas $16.60q $4,600 + $2.10q $5,700 +$0.50q Direct labor Indirect labor Supplies $1,300 + $0.10q Equipment depreciation $18,100 + $2.40q Factory rent $8,100 $3,000 $13,400 + $0.70q Property taxes Factory administration 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: Direct labor Indirect labor Utilities Actual Cost Incurred in March $ 66,380 $ 12,390 $ 8,140 Factory rent Supplies $ 1,920 Equipment depreciation $ 27,460 $ 8,500 $ 3,000 $ 15,500 Property taxes Factory administration Required: 1. Prepare the Production Department's planning budget for the month. 2. Prepare the Production Department's flexible budget for the month. ences for all expense items.
Chapter1: Financial Statements And Business Decisions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text: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
$16.60q
$4,600 + $2.10q
Direct labor
Indirect labor
Utilities
$5,700 + $0.50q
Supplies
$1,300 + $0.10q
Equipment depreciation
$18,100 + $2.40q
Factory rent
$8,100
$3,000
$13,400 + $0.70q
Property taxes
Factory administration
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:
Actual Cost
Incurred in
March
$ 66,380
Direct labor
Indirect labor
Utilities
Supplies
$ 12,390
$ 8,140
$ 1,920
Equipment depreciation
$ 27,460
$ 8,500
$ 3,000
$ 15,500
Factory rent
Property taxes
Factory administration
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.
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