Production department planning budget

Question

Question 1: 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	$14.80q
Indirect labor	$7,300 + $1.40q
Utilities	$8,200 + $0.70q
Supplies	$1,000 + $0.20q
Equipment depreciation	$22,500 + $3.10q
Factory rent	$6,600
Property taxes	$1,540
Factory administration	$11,650 + $1.70q

The actual costs incurred in March in the Production Department are listed below:

	Actual Cost Incurred in March
Direct labor	$123,730
Indirect labor	$19,060
Utilities	$16,370
Supplies	$3,070
Equipment depreciation	$51,330
Factory rent	$8,100
Property taxes	$1,540
Factory administration	$20,570

Requirement 1:

The company had budgeted for an activity level of 10,000 labor-hours in March. Prepare the Production Department's planning budget for the month.

Packaging Solutions Corporation
Production Department Planning Budget
For the Month Ended March 31

• Direct labor
• Indirect labor
• Utilities
• Supplies
• Equipment depreciation
• Factory rent
• Property taxes
• Factory administration

• Total expense

Requirement 2:

The company actually worked 9,300 labor-hours in March. Prepare the Production Department's flexible budget for the month.

Packaging Solutions Corporation
Production Department Flexible Budget
For the Month Ended March 31

•   Direct labor
•   Indirect labor
•   Utilities
•   Supplies
•   Equipment depreciation
•   Factory rent
•   Property taxes
•   Factory administration

•   Total expense