Required information Problem 9-42 Preparation of Master Budget (LO 9-3, 9-4, 9-5) [The following information applies to the questions displayed below.] 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. Direct material required per 100 boxes: Paperboard ($0.28 per pound) Corrugating medium ($0.14 per pound) Direct labor required per 100 boxes ($15.00 per hour) Type of Box P 25 pounds 65 pounds 15 pounds 0.40 hour 25 pounds 0.80 hour The following production-overhead costs are anticipated for the next year. The predetermined overhead rate is based on a production volume of 470,000 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 $ 14,250 60,990 46,500 31,000 24,000 54,500 $231,240 The following selling and administrative expenses are anticipated for the next year. Salaries and fringe benefits of sales personnel Advertising $136,500 30,500 Management salaries and fringe benefits Clerical wages and fringe benefits Miscellaneous administrative expenses Total 151,000 47,000 7,600 $372,600 The sales forecast for the next year is as follows: Sales Volume Box type C Box type P 475,000 boxes 475,000 boxes Sales Price $145.00 per hundred boxes 205.00 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 15,500 boxes 10,500 boxes Box type P Raw material: 25,500 boxes 20,500 boxes Paperboard 16,000 pounds 6,000 pounds Corrugating medium 7,000 pounds 12,000 pounds Prepare a master budget for FreshPak Corporation for the next year. Assume an income tax rate of 40 percent. Problem 9-42 Part 7 7. Prepare the budgeted income statement for the next year. (Do not round intermediate calculations.) Sales revenue Less: Cost of goods sold Gross margin Selling and administrative expenses Income before taxes Income tax expense Net income $ 1,662,500 372,600