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Item 10

Item 10 2 points

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Exercise 9-16 Flexible Budgets in a Cost Center [LO9-1, LO9-2]

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	$4,300 + $1.90q
Utilities	$5,600 + $0.50q
Supplies	$1,400 + $0.20q
Equipment depreciation	$18,600 + $2.70q
Factory rent	$8,000
Property taxes	$2,400
Factory administration	$13,300 + $0.60q

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	$	11,840
Utilities	$	8,190
Supplies	$	2,490
Equipment depreciation	$	29,940
Factory rent	$	8,400
Property taxes	$	2,400
Factory administration	$	15,170

Required:

1. Prepare the Production Departments planning budget for the month.

2. Prepare the Production Departments flexible budget for the month.

3. Calculate the spending variances for all expense items.