Preparation of Master Budget
FreshPak Corporation manufactures two types of cardboard boxes used in shipping canned food, fruit, and vegetable». The canned food box (type C) and the perishable food box (type P) have the following material and labor requirements.
| Type of Box | |
| C | P |
Direct material required per 100 boxes: |
|
|
Paperboard ($.20 per pound) | 30 pounds | 70 pounds |
Corrugating medium($.10per pound) | 20 pounds | 30 pounds |
Direct labor required per 100 boxes($12.00 per hour) | 25 hour | .50 hour |
The following manufacturing-overhead costs are anticipated for the next year. The predetermined overhead rate is based on a production volume of 495.000 units for each type of box. Manufacturing overhead is applied on the basis of direct-labor hours.
Indirect material | $ 10.500 |
Indirect labor | 50,000 |
Utilities | 25.000 |
Property taxes | 18,000 |
Insurance | 16.000 |
Depreciation | 29.000 |
Total | $148,500 |
The following selling and administrative expenses arc anticipated tor the next year.
Salaries and fringe benefits of sales personnel | $ 75.000 |
Advertising | 15.000 |
Management salaries and fringe benefits | 90,000 |
Clerical wages and fringe benefits | 26,000 |
Miscellaneous administrative expenses | 4,000 |
Total | $210,000 |
The sales forecast for the next year is as follows:
| Sales Volume | Sales Price |
Box type C | 500,000 boxes | $ 90,00 per hundred boxes |
Box type P | 500,000 boxes | 130,00 per hundred boxes |
The following inventory information is available for the next year. The unit production costs for each product are expected to be the same this year and next year.
| Expected Inventory | Desired Ending Inventory |
| January 1 | December 31 |
Finished goods: |
|
|
Box type C | 10,000 boxes | 5,000 boxes |
Box type P | 20,000 boxes | 15,000 boxes |
Raw material: |
|
|
Paperboard | 15,000 pounds | 5,000 pounds |
Corrugating medium | 5.000 pounds | 10,000 pounds |
Required: Prepare a master budget for FreshPak Corporation for the next year. Assume an income tax rate of 40 percent. Include the following schedules.
1. Sales budget.
2. Production budget.
3. Direct-material budget.
4. Direct-labor budget.
5. Manufacturing-overhead budget.
6. Selling and administrative expense budget.
7. Budgeted income statement. (Hint:To determine cast of goods sold. first compute the manufacturing cost per unit for each type of box. Include applied manufacturing overhead in the cost.)
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