Question
Exercise 9-16 (Algo) Flexible Budgets in a Cost Center [LO9-1, LO9-2] Packaging Solutions Corporation manufactures and sells a wide variety of packaging products. Performance reports
Exercise 9-16 (Algo) 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 | $4,800 + $2.00q |
Utilities | $5,000 + $0.80q |
Supplies | $1,800 + $0.20q |
Equipment depreciation | $18,000 + $2.80q |
Factory rent | $8,100 |
Property taxes | $2,500 |
Factory administration | $13,500 + $0.50q |
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 | $ 65,970 |
Indirect labor | $ 12,180 |
Utilities | $ 8,670 |
Supplies | $ 2,830 |
Equipment depreciation | $ 28,920 |
Factory rent | $ 8,500 |
Property taxes | $ 2,500 |
Factory administration | $ 14,780 |
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.
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