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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

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.

Type of Box
C P
Direct material required per 100 boxes:
Paperboard ($0.28 per pound) 25 pounds 65 pounds
Corrugating medium ($0.14 per pound) 15 pounds 25 pounds
Direct labor required per 100 boxes ($15.00 per hour) 0.40 hour 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 $ 14,250
Indirect labor 60,990
Utilities 46,500
Property taxes 31,000
Insurance 24,000
Depreciation 54,500
Total $ 231,240

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

Salaries and fringe benefits of sales personnel $ 136,500
Advertising 30,500
Management salaries and fringe benefits 151,000
Clerical wages and fringe benefits 47,000
Miscellaneous administrative expenses 7,600
Total $ 372,600

The sales forecast for the next year is as follows:

Sales Volume Sales Price
Box type C 475,000 boxes $ 145.00 per hundred boxes
Box type P 475,000 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 January 1 Desired Ending Inventory December 31
Finished goods:
Box type C 15,500 boxes 10,500 boxes
Box type P 25,500 boxes 20,500 boxes
Raw material:
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

Prepare the budgeted income statement for the next year. (Do not round intermediate calculations.)

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