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.

Cost Formulas
Direct labor $16.20q
Indirect labor $4,300 $1.70q
Utilities $5,600 $0.70q
Supplies $1,400 $0.20q
Equipment depreciation $18,400 $2.90q
Factory rent $8,200
Property taxes $2,700
Factory administration $13,200 $0.80q
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 $ 66,360
Indirect labor $ 10,620
Utilities 8,930
Supplies 2,450
Equipment depreciation $ 30,000
Factory rent 8,600
Property taxes $ 2,700
Factory administration $ 15,796
Required 1:

Prepare the Production Department's planning budget for the month

Required 2:

Prepare the Production Department's flexible budget for the month.

Answer 1

Answer:

A)$148,300

B)$143,800

Explanation:

Production department planning budget :

Budgeted labor hours = 4200

Direct labor $16.20(4200) = $68040

Indirect labor $4,300+$1.70(4200) = $11440

Utilities $5,600+$0.70(4200) = $8540

Supplies $1,400+$0.20(4200) = $2240

Equipment depreciation $18,400+$2.90(4200) = $30580

Factory rent $8,200

Property taxes $2,700

Factory administration $13,200+$0.80(4200) = $16560

Total - $(68040+11440+8540+2240+30580+8200+2700+16560) = $148,300

2.) Flexible budget for the month :

Actual labor hours = 4000

Direct labor $16.20(4000) = $64800

Indirect labor $4,300+$1.70(4000) = $11100

Utilities $5,600+$0.70(4000) = $8400

Supplies $1,400+$0.20(4000) = $2200

Equipment depreciation $18,400+$2.90(4000) = $30000

Factory rent $8,200

Property taxes $2,700

Factory administration $13,200+$0.80(4000) = $16400

Total cost - $(64800+11100+8400+2200+30000+8200+2700+16400) = $143,800