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: Type C Type P Paperboard ( $0.20 per pound) 30 pounds 70 pounds Corrugating medium ( $0.10 per pound) 20 pounds 30 pounds Direct labor required per 100 boxes ($12.00 per hour) 0.25 hour 0.50 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 $10,500 Indirect labor $50,000 Utilities $25,000 Property taxes $18,000 Insurance $16,000 Depreciation $29,000 Total $148,500 The following selling and administrative expenses are anticipated for the next year. Salaries and fringe benefits of sales personnel $75,000 Advertising $15,000 Management salaries and fringe benefits $90,000 Clerical wages and fringe benefits $26,000 Miscellaneous administrative expenses $4,000 Total $210,000 The sales forecast for the next year is as follows: Sales Volume Sales price Box Type C 500,000 boxes $90.00 per hundred boxes Box Type P 500,000 boxes $130.00 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. Finished goods: Expected Inventory January 1 Desired ending Inventory December 31 Box Type C 10,000 boxes 5,000 boxes Box Type P 20,000 boxes 15,000 boxes Raw Material: Paperboard 15,000 pounds 5,000 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. Include the following schedules. 1) Budgeted income statement. ( Hint: To determine the cost of goods sold, first compute the production cost per unit of each type of box. Include applied production overhead in the cost.)

Given that sales volume : 500000 boxes. selling and distribution expenses: 210000 fixed overheads: 148500 ( is applied on the basis of direct labor cost)Budgeted Income Statement:- Sales Revenue (450000+650000) 1100000 (-) Cost of goods sold {W.N.I] (320000) Gross Margin 780000 (-) Selling & Distribution Expenses 210000 Income before Taxes 570000 (-) Income Tax 40% 228000 Net Income 342000 Working Note:- Cost of goods Sold:- Paper Board:- Box C Box P Total Units Sold 500000 500000 Raw Material Required per Box 0.3 0.7 Raw Material Required per Production (Pounds) 150000 350000 500000 Price per Pound 0.2 Cost of Purchase paper boat (a) 100000 Corrugating:- Units Sold 500000 500000 Raw Material Required per Box 0.2 0.3 Raw Material Required per Production (Pounds) 100000 150000 250000 Price (Per Pound) 0.1 Cost of Purchase Corrugating (b) 25000 Direct Labor:- Production Requirement 500000 500000 Direct labor hour required per box (hrs.) 0.0025 0.005 Direct labor required per production (hrs.) 1250 2500 1750 Direct Labor Rate 12 Total direct labor cost (c) 45000 Fixed OH'SRate of Ovehead = 1485003712.5 hrs = 40 per hour 4950000.0025 + 4950000.005 = 3712.5 hrsHourse Worked = 3750 hrs(d) Fixed Overheads = 3750 x 40 = 150000COGS = a + b + c + d = 100000 + 25000 + 45000 + 150000COGS = 320000

Answered: FreshPak Corporation manufactures two types of cardboard boxes used in shipping canned food, fruit, and vegetables. The canned food box (Type C) and the…

FINANCIAL ACCOUNTING

10th Edition

ISBN: 9781259964947

Author: Libby

Publisher: MCG

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Question

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:	Type C	Type P
Paperboard ( $0.20 per pound)	30 pounds	70 pounds
Corrugating medium ( $0.10 per pound)	20 pounds	30 pounds
Direct labor required per 100 boxes ($12.00 per hour)	0.25 hour	0.50 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	$10,500
Indirect labor	$50,000
Utilities	$25,000
Property taxes	$18,000
Insurance	$16,000
Depreciation	$29,000
Total	$148,500

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

Salaries and fringe benefits of sales personnel	$75,000
Advertising	$15,000
Management salaries and fringe benefits	$90,000
Clerical wages and fringe benefits	$26,000
Miscellaneous administrative expenses	$4,000
Total	$210,000

The sales forecast for the next year is as follows:

	Sales Volume	Sales price
Box Type C	500,000 boxes	$90.00 per hundred boxes
Box Type P	500,000 boxes	$130.00 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.

Finished goods:	Expected Inventory January 1	Desired ending Inventory December 31
Box Type C	10,000 boxes	5,000 boxes
Box Type P	20,000 boxes	15,000 boxes
Raw Material:
Paperboard	15,000 pounds	5,000 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. Include the following schedules.

1) Budgeted income statement. ( Hint: To determine the cost of goods sold, first compute the production cost per unit of each type of box. Include applied production overhead in the cost.)

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