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: 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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:
| Cost Formulas | |
|---|---|
| Direct labor | $15.80q |
| Indirect labor | $8,200 + $1.60q |
| Utilities | $6,400 + $0.80q |
| Supplies | $1,100 + $0.40q |
| Equipment |
$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.
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:
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.
Transcribed Image Text: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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