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 $16.20q Indirect labor $4,700 + $1.40q Utilities $5,700 + $0.50q Supplies $1,700 + $0.20q Equipment depreciation $18,600 + $2.50q Factory rent $8,400 Property taxes $2,600 Factory administration $13,100 + $0.70q 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 Direct labor $ 64,740 Indirect labor $ 9,620 Utilities $ 8,140 Supplies $ 2,730 Equipment depreciation $ 28,350 Factory rent $ 8,800 Property taxes $ 2,600 Factory administration $ 15,200 Can you please help to prepare the following: A) Prepare the Production Department’s planning budget for the month. B) Prepare the Production Department’s flexible budget for the month. C) Calculate the spending variances for all expense items.
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 | $16.20q |
| Indirect labor | $4,700 + $1.40q |
| Utilities | $5,700 + $0.50q |
| Supplies | $1,700 + $0.20q |
| Equipment |
$18,600 + $2.50q |
| Factory rent | $8,400 |
| Property taxes | $2,600 |
| Factory administration | $13,100 + $0.70q |
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 | |
|---|---|
| Direct labor | $ 64,740 |
| Indirect labor | $ 9,620 |
| Utilities | $ 8,140 |
| Supplies | $ 2,730 |
| Equipment depreciation | $ 28,350 |
| Factory rent | $ 8,800 |
| Property taxes | $ 2,600 |
| Factory administration | $ 15,200 |
Can you please help to prepare the following:
A) Prepare the Production Department’s planning budget for the month.
B) Prepare the Production Department’s flexible budget for the month.
C) Calculate the spending variances for all expense items.
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