roblem 9-42 Preparation of Master Budget (LO 9-3, 9-4, 9-5)

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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 ($0.36 per pound)		35	pounds			75	pounds
Corrugating medium ($0.18 per pound)		25	pounds			35	pounds
Direct labor required per 100 boxes ($18.00 per hour)		0.20	hour			0.40	hour

The following production-overhead costs are anticipated for the next year. The predetermined overhead rate is based on a production volume of 450,000 units for each type of box. Production overhead is applied on the basis of direct-labor hours.

Indirect material	$	13,650
Indirect labor		87,950
Utilities		40,500
Property taxes		27,000
Insurance		20,000
Depreciation		48,500
Total	$	237,600

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

Salaries and fringe benefits of sales personnel	$	130,500
Advertising		28,500
Management salaries and fringe benefits		147,000
Clerical wages and fringe benefits		45,000
Miscellaneous administrative expenses		7,200
Total	$	358,200

The sales forecast for the next year is as follows:

	Sales Volume				Sales Price
Box type C		455,000	boxes		$	125.00	per hundred boxes
Box type P		455,000	boxes			185.00	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	11,500	boxes		6,500	boxes
Box type P	21,500	boxes		16,500	boxes
Raw material:
Paperboard	14,000	pounds		4,000	pounds
Corrugating medium	5,000	pounds		10,000	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.)

$ 1,410,500 Sales revenue Less: Cost of goods sold Gross margin Selling and administrative expenses Income before taxes Income tax expense 358,200