Required: 1. Prepare the Production Department's planning budget for the month. 2. Prepare the Production Department's flexible budget for the month. 3. Calculate the spending variances for all expense items.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
![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
Direct labor
Indirect labor
Utilities
Supplies
Equipment depreciation
Cost Formulas
The Production Department planned to work 4,300 labor-hours in March; however, it actually worked 4,100 labor-hours during the
month. Its actual costs incurred in March are listed below:
Factory rent
Property taxes
Factory administration
$16.509
$4,400 $2.00q
$5,000 + $0.50q
$1,300+ $0.109
$18,500 + $2.60q
$8,200
$2,400
$13,500+ $0.50q
Actual Cost
Incurred in
March
$ 69,270
$ 12,180
$ 7,540
$ 1,940
$ 29,160
$ 8,600
$ 2,400
$ 14,880
Required:
1. Prepare the Production Department's planning budget for the month.
2. Prepare the Production Department's flexible budget for the month.
3. Calculate the spending variances for all expense items.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1fe53eb2-d26f-48a3-a831-947cbce8cbe9%2Fde624a91-92c8-4fd3-ad1c-a029c29e6cca%2Fc0optqw_processed.jpeg&w=3840&q=75)
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