FreshPak 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. Problem 9-42 Preparation of Master Budget (LO 9-3, 9-4, 9-5) 1. Total sales revenue: $1.100.000 3. Cost of purchases (paper- board): $97,000 5. Total overhead: $148,500 7. Predetermined overhead rate: $40 per hour Type of Box P Direct material required per 100 boxes: Paperboard ($.20 per pound) ... Corrugating medium ($.10 per pound) .. Direct labor required per 100 boxes ($12.00 per hour) .... ............... 30 pounds 20 pounds .25 hour 70 pounds 30 pounds .50 hour The following production-overhead costs are anticipated for the next year. The predetermined over- head 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. ........ Indirect material Indirect labor Utilities Property taxes Insurance Depreciation Total $ 10,500 50,000 25,000 18,000 16,000 29,000 $148,500 ....... ............ The following selling and administrative expenses are anticipated for the next year. Salaries and fringe benefits of sales personnel Advertising Management salaries and fringe benefits ......... Clerical wages and fringe benefits Miscellaneous administrative expenses ......... Total ...................... $ 75,000 15,000 90,000 26,000 4,000 $210,000 ..... 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 each product are expected to be the same this year and next year. Expected Inventory January 1 Desired Ending Inventory December 31 10,000 boxes 20,000 boxes 5,000 boxes 15,000 boxes Finished goods: Box type C. Box type P Raw material: Paperboard Corrugating medium 15,000 pounds 5,000 pounds 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. Production-overhead budget. 6. Selling and administrative expense budget. 7. Budgeted income statement. (Hint: To determine cost of goods sold, first compute the production cost per unit for each type of box. Include applied production overhead in the cost.)
