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 $4,600+ $1.40q Utilities $5,300 + $0.70q Supplies $1,300 + $0.20q Equipment depreciation $ 18,100+ $2.70q Factory rent $8, 100 Property taxes $2,800 Factory administration $13, 400+ $0.70q 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 $ 9,940 Utilities $8,770 Supplies $2,390 Equipment depreciation $ 29,440 Factory rent $ 8,500 Property taxes $ 2,800 Factory administration $ 15,710 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.
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 $4,600+ $1.40q Utilities $5,300 + $0.70q Supplies $1,300 + $0.20q Equipment depreciation $ 18,100+ $2.70q Factory rent $8, 100 Property taxes $2,800 Factory administration $13, 400+ $0.70q 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 $ 9,940 Utilities $8,770 Supplies $2,390 Equipment depreciation $ 29,440 Factory rent $ 8,500 Property taxes $ 2,800 Factory administration $ 15,710 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.
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.
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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 Direct labor $
16.50q Indirect labor $4,600+ $1.40q Utilities $5,300 + $0.70q Supplies $1,300 + $0.20q Equipment depreciation $
18,100 + $2.70q Factory rent $8, 100 Property taxes $2,800 Factory administration $13,400 + $0.70q 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 $ 9,940 Utilities $ 8,770 Supplies $ 2,390 Equipment depreciation $ 29,440 Factory rent $ 8,500 Property taxes $
2,800 Factory administration $ 15,710 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.
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