Problem 9-39 Preparation of Master Budget (LO 9-3, 9-4, 9-5, 9-6)

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Edgeworth Box 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.

	Type of Box
	C		P
Direct material required per 100 boxes:
Corrugating medium ($0.14 per pound)	25	pounds	35	pounds
Paperboard ($0.28 per pound)	35	pounds	75	pounds
Direct labor required per 100 boxes ($14.00 per hour)	0.20	hour	0.40	hour

The unit production costs for each product are expected to be the same this year and next year.

The following production-overhead costs are anticipated for the next year. The predetermined overhead rate is based on a production volume of 395,000 units for each type of box. Production overhead is applied on the basis of direct-labor hours.

Indirect material	$	12,000
Indirect labor		45,050
Utilities		30,000
Property taxes		20,000
Insurance		15,000
Depreciation		32,000
Total	$	154,050

The following selling and administrative expenses are anticipated for the next year.

Salaries and fringe benefits of sales personnel	$	114,000
Advertising		23,000
Management salaries and fringe benefits		136,000
Clerical wages and fringe benefits		39,500
Miscellaneous administrative expenses		6,100
Total	$	318,600

The sales forecast for the next year is as follows:

	Sales Volume		Sales Price
Box type C	400,000	boxes	$	120	per hundred boxes
Box type P	400,000	boxes		180	per hundred boxes

The following inventory information is available for the next year.

	Expected Inventory January 1		Desired Ending Inventory December 31
Finished goods:
Box type C	11,000	boxes	6,000	boxes
Box type P	21,000	boxes	16,000	boxes
Raw material:
Corrugating medium	5,500	pounds	10,500	pounds
Paperboard	15,500	pounds	5,500	pounds

Prepare a master budget for Edgeworth Box Corporation for the next year. Assume an income tax rate of 30 percent. Include the following schedules.