Packaging Solutions Corporation manufactures and sells a widevariety of packaging products. Performance reports are preparedmonthly for each department. The planning budget and flexiblebudget for the Production Department are based on the followingformulas, where q is the number of labor-hours worked in amonth:
| Cost Formulas |
| Direct labor | $16.30q |
| Indirect labor | $4,200 + $1.50q |
| Utilities | $5,100 + $0.60q |
| Supplies | $1,200 + $0.10q |
| Equipment depreciation | $18,600 + $2.50q |
| Factory rent | $8,400 |
| Property taxes | $2,600 |
| Factory administration | $13,300 + $0.70q |
|
The Production Department planned to work 4,500 labor-hours inMarch; however, it actually worked 4,300 labor-hours during themonth. Its actual costs incurred in March are listed below:
| Actual Cost Incurred in March |
| Direct labor | $ | 71,670 | |
| Indirect labor | $ | 10,130 | |
| Utilities | $ | 8,190 | |
| Supplies | $ | 1,860 | |
| Equipment depreciation | $ | 29,350 | |
| Factory rent | $ | 8,800 | |
| Property taxes | $ | 2,600 | |
| Factory administration | $ | 15,680 | |
|
Required:
1. Prepare the Production Department’s planning budget for themonth.
2. Prepare the Production Department’s flexible budget for themonth.
3. Calculate the spending variances for all expense items.
