ACCT-202 Accounting for Decision Making II Case Assignment Preparation of Master Budget ErcsbPak Corporation manufactures two types of cardboard boxes used in shipping canned food, fruit, and vegetables. The canned food box (type C) and the perishable food box (type P) have the following material and labor requirements. e of Box required per 100 boxes: Direct material Paperboard (S.20 per pound) Comugating medium (S.10 per pound) Direct labor required per 100 boxes ($12.00 per hour) 25 hour 50 hour 30 pounds 20 pounds 70 pounds 30 pounds The following production-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. Production overhead is applied on the basis of direct-labor hours. overheadcof495,00tunitsforcathtypeofbox. Indirect matrial 10,500 Indirect labor 50,000 Utilities Property taxes 18,000 Insurance Depreciation 29,000 Total 25,000 16,000 $148,500 The following selling and administrative c are anticipated for the next year. Salaries and fringe benefits of sales personnel 75,000 15,000 90,000 26,000 4,000 $210,000 Management salaries and fringe benefits Clerical wages and fringe benefits e cxpenscs Total The sales forecast for the next year is as follows: Box type C Box type P Sales Volume 500,000 boxes 500,000 boxes Sales Price $90.00 per hundred boxes 130.00 per hundred boxes The following inventory information is available for the next year. The unit production costs for cach 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 Box type P Raw material: Paperboarod Comugating medium 10,000 boxes 20,000 boxes 5,000 boxes 15,000 boxes 15,000 pounds 5,000 pounds 5,000 pounds 10,000 pounds Required: Part 2. Prepare a Flexible Budget: Prepare a flexible budget based on actual sales of Box Type C480,000 units . . Box Type P 480000 units Part 3. Prepare a variance report for the budgeted Income Statement. Your report must compare your Master Budget to your Flexible Budget and your Flexible Budget to your Actual results. Only prepare the variance report for the budgeted Income Statement. For the format use the format used on the lecture slides for Chapter9 slide number 14. Sales Less: Cost of Goods Sold Box C: Box P: Gross Margin Selling and administrative expenses Income before taxes Income Tax Expense Net Income $1 056,000 $108,000 206.400 314400 741,600 210,000 531,600 212.640 318,960 Direct Materials Budget Budgeted production (in units) Production in lots of 100 boxes (495,000/100) Direct material required per 100 boxes 495,000 4,950 495,000 4,950 Paper board Corrugating mediunm 30 pounds 20 pounds 70 pounds 30 pounds Direct material required for budgeted production Paper board 148,000 pounds 346,500 pounds 99,000 pounds 148,500 pounds Corrugating mediunm Paper Board Corrugating Medium Direct materials required for budgeted production For C (in pounds) For P ( in pounds) 148,500 346,500 495,000 5,000 500,000 15,000 485,000 $0.20 97,000 99,000 148,500 247,500 10,000 257,500 5,000 252,500 $0.10 25,250 Add: Desired ending inventory Total direct materials requiered 9 Less: Beginning inventory Budgeted purchases in pounds Purchase price per pound Budgeted purchases in dollars 1 2 Direct Material Budget Direct-labor Budget Production OH Budget Direct Labor Budget Budgeted production in units Production in lots of 100 boxes (495,000/100) Direct Labor-hour required per 100 boxes Total direct labor-hours required for budgeted production Direct labor rate per hour Direct labor cost 495,000 4,950 0.25 hour ,237.50 $12 $14,850 495,000 4,950 0.50 hour 2,475 hours $12 $29,700 total budgeted manufactoring overhead- total budgeted direct labor-hours- Predetermined manufactoring overhead rate- 148,500 3,712.50 $40 1,237.50 2,475- 13 Direct-labor hours Pre-determined overhead rate Budgeted manufactoring overhead 1,237.50 hours 2,475 hours $40 $49,500 $99,000 $40 Direct Material BudgetDirect-labor Budget Production OH Budget 1 Budgeted sales (in units) Budgeted selling and administration expeses ($210,000/2) 500,000 105,000 500,000 $105,000 Budgeted cost of goods sold for each product Direct materials cosr per unit Paperboard (Require per 100 boxes/100) x $.010 0.06 0.02 0.08 0.03 0.1 0.21 Corrugating medium (Required per 100 boxes/100) x $0.10 Total cost of direct materials Direc labor cost per unit (Direc labor hours required per 100 boxes/100 x $12 Manufactoring overhead (Predeterminated rate x Direct labor-hours required per hour) Total manufcatoring cost per box Budgeted production Budgeted cost of goods manufactured Add: Estimated beginning inventory of finished goods (Units x Manufactoring cost per hour) 0.14 0.03 0.17 0.06 0.2 0.43 495,000495,000 103,950 212,850 8,600 106,050 221,450 6,450 105,000215,000 2,100 Less: Desired ending inventory of finished goods (Units x Manufactoring cost per unit) Budgeted cost of goods sold 1,050 Amount ($) Budgeted Income Statement Sales (Budgeted sales/100) x Sales price per 100 boxes less: Cost of goods sold Gross Profit Less: Selling and administrative expenses Income before income taxes Less: Income taxes Net income 450,000 105,000 345,000 105,000 240,000 96,000 144,000 650,000 215,000 435,000 105,000 330,000 132,000 198,000 @40%