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

Direct Labor	$16.60q
Indirect Labor	4700+2.00q
Utilities	5300+0.80q
Supplies	1300+0.20q
Equipment depreciation	18700+3.10q
Factory Rent	8300
Property Taxes	2700
Factory Administration	13300+0.80q

The actual costs incurred in March in the Production Department are listed below:

	Actual Cost Incurred in March
Direct Labor	$71360
Indirect Labor	12680
Utilities	9210
Supplies	2390
Equipment Depreciation	31720
Factory Rent	8700
Property Taxes	2700
Factory Administration	16050

Required:

1.

The company had budgeted for an activity level of 4,400 labor-hours in March. Complete the Production Department’s planning budget for the month.

2.

The company actually worked 4,200 labor-hours in March. Complete the Production Department’s flexible budget for the month.

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.)

Answer 1

	Equation given	Planning	Actual	Flexible	Spending Variane
Labour Hour		4400 Hour	4200 Hour	4200 Hour
Direct Labour	$16.60q	73040	71360	69720	1640	U
Indiret Labour	4700+2q	13500	12680	13100	-420	F
Utilities	5300+0.80q	8820	9210	8660	550	U
Supplies	1300+0.20q	2180	2390	2140	250	U
Equipment Depreciation	18700+3.10q	32340	31720	31720	0	None
Factory Rent	8300	8300	8700	8300	400	U
property Taxes	2700	2700	2700	2700	0	None
Factory Administration	13300+0.80q	16820	16050	16660	-610	F
Total Expense		157700	154810	153000	1810	U