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	$16.30q
Indirect labor	$4,400 + $1.50q
Utilities	$5,200 + $0.80q
Supplies	$1,700 + $0.20q
Equipment depreciation	$18,700 + $2.60q
Factory rent	$8,000
Property taxes	$2,700
Factory administration	$13,400 + $0.60q

The Production Department planned to work 4,200 labor-hours in March; however, it actually worked 4,000 labor-hours during the month. Its actual costs incurred in March are listed below:

	Actual Cost Incurred in March
Direct labor	$ 66,780
Indirect labor	$ 9,880
Utilities	$ 8,950
Supplies	$ 2,750
Equipment depreciation	$ 29,100
Factory rent	$ 8,400
Property taxes	$ 2,700
Factory administration	$ 15,150

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.