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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 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 Supplies Equipment depreciation Cost Formulas $16.109 $4,600+ $1.50q $5,300+ $0.709 $1,600+ $0.20q $18,500 + $2.709 $8,600 $3,000 $13,600 + $0.809 Factory rent Property taxes Factory administration Actual Cost Incurred in March $ 64,330 $ 9,930 $ 8,560 $ 2,630 $ 29,030 $ 9,000 $ 3,000 $ 16,110 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.

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 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 Supplies Equipment depreciation Cost Formulas $16.109 $4,600+ $1.50q $5,300+ $0.709 $1,600+ $0.20q $18,500 + $2.709 $8,600 $3,000 $13,600 + $0.809 Factory rent Property taxes Factory administration Actual Cost Incurred in March $ 64,330 $ 9,930 $ 8,560 $ 2,630 $ 29,030 $ 9,000 $ 3,000 $ 16,110 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.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 Cost Formulas $16.109 $4,600+ $1.50q $5,300 + $0.709 $1,600+ $0.209 $18,500+ $2.709 $8,600 $3,000 $13,600 + $0.809 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 Supplies Equipment depreciation Factory rent Property taxes Factory administration Actual Cost Incurred in March $ 64,330 $ 9,930 $ 8,560 $ 2,630 $ 29,030 $ 9,000 $ 3,000 $ 16,110 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. > Answer is complete but not entirely correct.
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 Cost Formulas $16.109 $4,600+ $1.50q $5,300 + $0.709 $1,600+ $0.209 $18,500+ $2.709 $8,600 $3,000 $13,600 + $0.809 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 Supplies Equipment depreciation Factory rent Property taxes Factory administration Actual Cost Incurred in March $ 64,330 $ 9,930 $ 8,560 $ 2,630 $ 29,030 $ 9,000 $ 3,000 $ 16,110 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. > Answer is complete but not entirely correct.
Complete this question by entering your answers in the tabs below. Required 1 Required 2 Labor-hours Direct labor Indirect labor Utilities Supplies Equipment depreciation Required 3 Calculate the spending variances for all expense items. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Packaging Solutions Corporation Spending Variances For the Month Ended March 31 Factory rent Property taxes Factory administration Total expense Actual Results Answer is complete but not entirely correct. 3,900 $ 64,330 9,930 8,560 2,630 29,030 9,000 3,000 16,110 $ 142,590 Spending Variances $ 1,540 U 520✔ F 530✔ U 20 U 0✔ None 400 U 0✔ None 610 F $1,320 U < Required 2 ›› › › › › › › › ♥ ✔$ 62,790 ✓ Flexible Budget ✓ 3,900✔ 10,450 8,030 2,380 ›› › › › › 29,030 8,600✔ 3,000 16,720✔ $ 141,000✔ Required 3 >
Transcribed Image Text:Complete this question by entering your answers in the tabs below. Required 1 Required 2 Labor-hours Direct labor Indirect labor Utilities Supplies Equipment depreciation Required 3 Calculate the spending variances for all expense items. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Packaging Solutions Corporation Spending Variances For the Month Ended March 31 Factory rent Property taxes Factory administration Total expense Actual Results Answer is complete but not entirely correct. 3,900 $ 64,330 9,930 8,560 2,630 29,030 9,000 3,000 16,110 $ 142,590 Spending Variances $ 1,540 U 520✔ F 530✔ U 20 U 0✔ None 400 U 0✔ None 610 F $1,320 U < Required 2 ›› › › › › › › › ♥ ✔$ 62,790 ✓ Flexible Budget ✓ 3,900✔ 10,450 8,030 2,380 ›› › › › › 29,030 8,600✔ 3,000 16,720✔ $ 141,000✔ Required 3 >
Expert Solution
Step 1: Spending variance :

 

Variance is the  difference between standard cost and actual cost incurred. Variance may be calculated on all the elements of cost, sales and profit. 

Variance analysis means  the study of deviations of actual behaviour from forecasted or planned behaviour in budgeting or management accounting..

Spending variances will occur when there is difference between actual results and flexible budget data.



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