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 $16.50q Indirect labor $4,100 + $1.60q Utilities $5,100 + $0.70q Supplies $1,200 + $0.40q Equipment depreciation $18,000 + $2.50q Factory rent $8,500 Property taxes $3,000 Factory administration $13,500 + $0.80q The Production Department planned to work 4,400 labor-hours in March; however, it actually worked 4,200 labor-hours during the month. Its actual costs incurred in March are listed below: Actual Cost Incurred in March Direct labor $ 70,920 Indirect labor $ 10,320 Utilities $ 8,570 Supplies $ 3,170 Equipment depreciation $ 28,500 Factory rent $ 8,900 Property taxes $ 3,000 Factory administration $ 16,250 Prepare the Production Department’s flexible budget performance report for March, including both the spending and activity variances.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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 | $16.50q |
| Indirect labor | $4,100 + $1.60q |
| Utilities | $5,100 + $0.70q |
| Supplies | $1,200 + $0.40q |
| Equipment |
$18,000 + $2.50q |
| Factory rent | $8,500 |
| Property taxes | $3,000 |
| Factory administration | $13,500 + $0.80q |
The Production Department planned to work 4,400 labor-hours in March; however, it actually worked 4,200 labor-hours during the month. Its actual costs incurred in March are listed below:
| Actual Cost Incurred in March | |
|---|---|
| Direct labor | $ 70,920 |
| Indirect labor | $ 10,320 |
| Utilities | $ 8,570 |
| Supplies | $ 3,170 |
| Equipment depreciation | $ 28,500 |
| Factory rent | $ 8,900 |
| Property taxes | $ 3,000 |
| Factory administration | $ 16,250 |
Prepare the Production Department’s flexible budget performance report for March, including both the spending and activity variances.
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