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 | $16.20q |
| Indirect labor | $4,200 + $1.60q |
| Utilities | $5,200 + $0.90q |
| Supplies | $1,200 + $0.30q |
| Equipment depreciation | $18,600 + $2.40q |
| Factory rent | $8,500 |
| Property taxes | $2,700 |
| Factory administration | $13,500 + $0.70q |
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The Production Department planned to work 4,200 labor-hours inMarch; however, it actually worked 4,000 labor-hours during themonth. Its actual costs incurred in March are listed below:
| Actual Cost Incurred in March |
| Direct labor | $ | 66,360 | |
| Indirect labor | $ | 10,100 | |
| Utilities | $ | 9,370 | |
| Supplies | $ | 2,670 | |
| Equipment depreciation | $ | 28,200 | |
| Factory rent | $ | 8,900 | |
| Property taxes | $ | 2,700 | |
| Factory administration | $ | 15,670 | |
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Required:
1. Prepare the Production Department’s planning budget for themonth.
2. Prepare the Production Department’s flexible budget for themonth.
3. Prepare the Production Department’s flexible budgetperformance report for March, including both the spending andactivity variances.
1) Prepare the Production Department’s planning budget for themonth.
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| | Packaging Solutions Corporation | | Production Department PlanningBudget | | For the Month Ended March 31 | | | | | | Direct labor | | | Indirect labor | | | Utilities | | | Supplies | | | Equipment depreciation | | | Factory rent | | | Property taxes | | | Factory administration | | | Total expense | |
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2) Prepare the Production Department’s flexible budget for themonth.
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| | Packaging Solutions Corporation | | Production Department FlexibleBudget | | For the Month Ended March 31 | | | | | | Direct labor | | | Indirect labor | | | Utilities | | | Supplies | | | Equipment depreciation | | | Factory rent | | | Property taxes | | | Factory administration | | | Total expense | |
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3) Prepare the Production Department’s flexible budgetperformance report for March, including both the spending andactivity variances. (Indicate the effect of each variance byselecting "F" for favorable, "U" for unfavorable, and "None" for noeffect (i.e., zero variance). Input all amounts as positivevalues.)
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| | Packaging Solutions Corporation | | Production Department Flexible BudgetPerformance Report | | For the Month Ended March 31 | | Actual Results | | Flexible Budget | | Planning Budget | | Labor-hours | 4,000 | | | | | | | | | | | | | | | | Direct labor | $66,360 | | | | | | | | Indirect labor | 10,100 | | | | | | | | Utilities | 9,370 | | | | | | | | Supplies | 2,670 | | | | | | | | Equipment depreciation | 28,200 | | | | | | | | Factory rent | 8,900 | | | | | | | | Property taxes | 2,700 | | | | | | | | Factory administration | 15,670 | | | | | | | | Total expense | $143,970 | | | | | | |
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