required: 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.)

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. Type of Box P Direct material required per 100 boxes: Paperboard ($.20 per pound) 30 pounds 70 pounds Corrugating medium ($.10 per pound) 20 pounds 30 pounds Direct labor required per 100 boxes ($12.00 per hour) .25 hour 50 hour 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. Indirect material Indirect labor Utilities Property taxes Insurance Depreciation Total $ 20,900 65,000 45,000 18.0001 34.000 56.000 $162.000 The following selling and administrative expenses are anticipated for the next year. Salaries and fringe benefits of sales personnel $95.000 Advertising 56,000 Management salaries and fringe benefits 60.000 Clerical wages and fringe benefits 46,000 Miscellaneous administrative expenses 4.000 Total $257.000 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. Finished goods Box type C Box type P Sales Volume boxes 500,000 500,000 Sales Price per hundred boxes $150.00 200 Expected inventory Jan 1st 30.000 15,000 Desired inventory Dec 31st 7,000 boxes 20.000 boxes Finished goods: Box type C Box type P Raw material: Paperboar Corrugating medium 30.0001 15.000 5,000 pounds 10.000 pounds Master Budget 1. Sales Budget: Total Sales (in units) Sales price per unit Sales revenue Box C 500,000 $ 1.50 $ 750,000 Box P 500,000 $ 2.00 $1,000,000 $1,750,000 2. Production Budget (in units): Sales Add: Desired ending inventory Total units needed Deduct: Beginning inventory Production requirements Box C 500,000 7,000 507,000 30,000 477,000 Box P 500,000 20,000 520,000 15,000 505,000 3. Raw material budget: PAPERBOARD Total Box C 495,000 0.30 Box P 495,000 0.70 148,500 346,500 495,000 Production requirements (number of boxes) Raw material required per box (pounds) Raw material required for production (pounds) Add: Desired ending raw-material inventory Total raw-material needs Deduct: Beginning raw-material inventory Raw material to be purchased Price (per pound) Cost of purchases (paperboard) 5,000 500,000 30,000 470,000 0.20 94,000 $ $ CORRUGATING MEDIUM Total Production requirements (number of boxes) Raw material required per box (pounds) Raw material required for production (pounds) Add: Desired ending raw-material inventory Total raw-material needs Box C 495,000 0.20 99,000 Box P 495,000 0.30 148,500 247,500 10,000 257.500 Deduct: Beginning raw-material inventory Raw material to be purchased Price (per pound) Cost of purchases (corrugating medium) 15,000 242,500 0.10 24,250 $ $ Total cost of raw material purchases $ 118,250 4. Direct labor budget: Total Production requirements (number of boxes) Direct labor required per box (hours) Direct labor required for production (hours) Direct-labor rate Total direct-labor cost Box C 495,000 0.0025 1,237.5 Box P 495,000 0.0050 2,475.0 *** $ $ 3,712.5 12 44,550 5. Production overhead budget: Indirect material Indirect labor Utilities Property taxes Insurance Depreciation $ 20,900 65,000 45,000 18,000 34,000 56,000 Total overhead $ 162,000 6. Selling and administrative expense budget: Salaries and fringe benefits of sales personnel Advertising Management salaries and fringe benefits Clerical wages and fringe benefits Miscellaneous administrative expenses Total selling and administrative expenses $ 95,000 56,000 60,000 46,000 4,000 $ 257,000 7. Budgeted income statement: Sales revenue Less: Cost of goods sold:* Box C Box P Gross margin Selling and administrative expenses Income before taxes Income tax expense Net income *Calculation of cost of goods sold: (a) Predetermined overhead rate Budgeted manufacturing overhead rate Volume of direct-labor hours Rate per hour (b) Calculation of manufacturing cost per unit: Box C Box P Direct material Paperboard Corrugating medium Direct labor Applied manufacturing overhead Manufacturing cost per unit 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. Type of Box P Direct material required per 100 boxes: Paperboard ($.20 per pound) 30 pounds 70 pounds Corrugating medium ($.10 per pound) 20 pounds 30 pounds Direct labor required per 100 boxes ($12.00 per hour) .25 hour 50 hour 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. Indirect material Indirect labor Utilities Property taxes Insurance Depreciation Total $ 20,900 65,000 45,000 18.0001 34.000 56.000 $162.000 The following selling and administrative expenses are anticipated for the next year. Salaries and fringe benefits of sales personnel $95.000 Advertising 56,000 Management salaries and fringe benefits 60.000 Clerical wages and fringe benefits 46,000 Miscellaneous administrative expenses 4.000 Total $257.000 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. Finished goods Box type C Box type P Sales Volume boxes 500,000 500,000 Sales Price per hundred boxes $150.00 200 Expected inventory Jan 1st 30.000 15,000 Desired inventory Dec 31st 7,000 boxes 20.000 boxes Finished goods: Box type C Box type P Raw material: Paperboar Corrugating medium 30.0001 15.000 5,000 pounds 10.000 pounds Master Budget 1. Sales Budget: Total Sales (in units) Sales price per unit Sales revenue Box C 500,000 $ 1.50 $ 750,000 Box P 500,000 $ 2.00 $1,000,000 $1,750,000 2. Production Budget (in units): Sales Add: Desired ending inventory Total units needed Deduct: Beginning inventory Production requirements Box C 500,000 7,000 507,000 30,000 477,000 Box P 500,000 20,000 520,000 15,000 505,000 3. Raw material budget: PAPERBOARD Total Box C 495,000 0.30 Box P 495,000 0.70 148,500 346,500 495,000 Production requirements (number of boxes) Raw material required per box (pounds) Raw material required for production (pounds) Add: Desired ending raw-material inventory Total raw-material needs Deduct: Beginning raw-material inventory Raw material to be purchased Price (per pound) Cost of purchases (paperboard) 5,000 500,000 30,000 470,000 0.20 94,000 $ $ CORRUGATING MEDIUM Total Production requirements (number of boxes) Raw material required per box (pounds) Raw material required for production (pounds) Add: Desired ending raw-material inventory Total raw-material needs Box C 495,000 0.20 99,000 Box P 495,000 0.30 148,500 247,500 10,000 257.500 Deduct: Beginning raw-material inventory Raw material to be purchased Price (per pound) Cost of purchases (corrugating medium) 15,000 242,500 0.10 24,250 $ $ Total cost of raw material purchases $ 118,250 4. Direct labor budget: Total Production requirements (number of boxes) Direct labor required per box (hours) Direct labor required for production (hours) Direct-labor rate Total direct-labor cost Box C 495,000 0.0025 1,237.5 Box P 495,000 0.0050 2,475.0 *** $ $ 3,712.5 12 44,550 5. Production overhead budget: Indirect material Indirect labor Utilities Property taxes Insurance Depreciation $ 20,900 65,000 45,000 18,000 34,000 56,000 Total overhead $ 162,000 6. Selling and administrative expense budget: Salaries and fringe benefits of sales personnel Advertising Management salaries and fringe benefits Clerical wages and fringe benefits Miscellaneous administrative expenses Total selling and administrative expenses $ 95,000 56,000 60,000 46,000 4,000 $ 257,000 7. Budgeted income statement: Sales revenue Less: Cost of goods sold:* Box C Box P Gross margin Selling and administrative expenses Income before taxes Income tax expense Net income *Calculation of cost of goods sold: (a) Predetermined overhead rate Budgeted manufacturing overhead rate Volume of direct-labor hours Rate per hour (b) Calculation of manufacturing cost per unit: Box C Box P Direct material Paperboard Corrugating medium Direct labor Applied manufacturing overhead Manufacturing cost per unit