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	$4,600 + $1.80q
Utilities	$5,500 + $0.80q
Supplies	$1,600 + $0.30q
Equipment depreciation	$18,100 + $2.60q
Factory rent	$8,400
Property taxes	$2,900
Factory administration	$13,000 + $0.60q

The Production Department planned to work 4,500 labor-hours in March; however, it actually worked 4,300 labor-hours during the month. Its actual costs incurred in March are listed below:

	Actual Cost Incurred in March
Direct labor	$ 72,570
Indirect labor	$ 11,880
Utilities	$ 9,490
Supplies	$ 3,160
Equipment depreciation	$ 29,280
Factory rent	$ 8,800
Property taxes	$ 2,900
Factory administration	$ 14,930

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.

\begin{tabular}{|l|} \hline \multicolumn{1}{|c|}{ Packaging Solutions Corporation } \\ \hline \multicolumn{1}{|c|}{ Production Department Flexible Budget } \\ \hline \multicolumn{1}{|c|}{ For the Month Ended March 31} \\ \hline Direct labor \\ \hline Indirect labor \\ \hline Utilities \\ \hline Supplies \\ \hline Equipment depreciation \\ \hline Factory rent \\ \hline Property taxes \\ \hline Factory administration \\ \hline Total expense \\ \hline \end{tabular} Calculate the spending variances for all expense items. (Indicate the effect of each for unfavorable. and "None" for no effect (i.e.. zero variance). Tnnut all amounts as