Question

O 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 Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration $16.20q $4,400 $1.50q $5,600 se.40q $1,6ee $e.3eq $18,7ee $2.70q $8,1ee $2,70e $13,80e$e.68q 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 66,360 $ 9,880 $ 7,67e $ 3,e7e $ 29,500 $ 8,500 Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Dronantu +avac 7AA Prev 1 of 1 Next 2:10 PM LO to search 11/2/2019

Answer 1

1/ Production Department planning budget for the month = Sum of all the cost formulas

= $54,900 + 21.7 q (where q is the no of hours)

Since the department planned to work for 4200 hours so the planning budget = $54900 + 21.7 * 4200

= $146,040

2/ Flexible budget = 21.7 q (where q is the no of hours)

Since the department planned to work for 4200 hours so the flexible budget = $21.7 * 4200

= $91,140

3/ Actual total cost = Sum of all actual cost = $143,230

Fixed cost = $54,900

So actual flexible spending = $143,230 - $54,900

= $88,330

Since the department planned to work for 4200 hours so the flexible budget = $21.7 * 4200

= $91,140

So variance in spending = Actual flexible spending - Planned flexible spending

= $88,330 - $91,140

= - $2810

Variance in activity = - $2810 / 21.7

= - 129.49 hrs