Question

Exercise 9-15 Flexible Budget Performance Report in a Cost Center (LO9-1, LO9-2, LO9-3, LO9-4] 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: Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration Cost Formulas $16.207 $4,600 + $1.509 $5,400 + $0.509 $1,200 + $0.309 $18,300 + $2.809 $8,300 $2,700 $13,400 + $0.809 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: Direct labor Indirect labor Utilities Supplies Equipment depreciation Factory rent Property taxes Factory administration Actual Cost Incurred in March $ 66,360 $ 10,080 $ 7,890 $ 2,670 $ 29,500 $ 8,700 $ 2,700 $ 15,990

Answer 1

1
Planning Budget
Budgeted labor hours	4200
Direct labor	68040	=4200*16.2
Indirect labor	10900	=4600+(4200*1.5)
Utilities	7500	=5400+(4200*0.5)
Supplies	2460	=1200+(4200*0.3)
Equipment Depreciation	30060	=18300+(4200*2.8)
Factory rent	8300
Property taxes	2700
Factory administration	16760	=13400+(4200*0.8)
Total expenses	146720
2
Flexible Budget
Actual labor hours	4000
Direct labor	64800	=4000*16.2
Indirect labor	10600	=4600+(4000*1.5)
Utilities	7400	=5400+(4000*0.5)
Supplies	2400	=1200+(4000*0.3)
Equipment Depreciation	29500	=18300+(4000*2.8)
Factory rent	8300
Property taxes	2700
Factory administration	16600	=13400+(4000*0.8)
Total expenses	142300
3
	Actual	Spending variance		Flexible budget	Activity variance		Planning budget
Labor hours	4000			4000			4200
Direct labor	66360	1560	U	64800	3240	F	68040
Indirect labor	10080	520	F	10600	300	F	10900
Utilities	7890	490	U	7400	100	F	7500
Supplies	2670	270	U	2400	60	F	2460
Equipment Depreciation	29500	0	None	29500	560	F	30060
Factory rent	8700	400	U	8300	0	None	8300
Property taxes	2700	0	None	2700	0	None	2700
Factory administration	15990	610	F	16600	160	F	16760
Total expenses	143890	1590	U	142300	4420	F	146720