Question

In: Accounting

The company produces 2 types of plastic containers, type A and B. The products have following...

The company produces 2 types of plastic containers, type A and B. The products have following expenses on labor and material

Container A Container B

Direct material per 100 containers

Plastic X ($0.2 per kg) 30 kg 70 kg

Plastic Y ($0.1 per kg) 20 kg 30 kg

Direct labour per 100 containers (12$ per hour). 0.25 hour 0.5 hour

The following overheads are planned for the next period. The predetermined rate is based on production volume of 495,000 units of each product. Manufacturing overheads are applied on the bases of direct labor hours:

Indirect material USD 10,500

Indirect labor USD 50,000

Utilities USD 25,000

Property taxes USD 18,000

Insurance USD 16,000

Depreciation USD 29,000

Total USD 148,500

The following selling and administrative expenses are planned:

Salaries USD 75,000

Advertising USD 15,000

Management salaries. USD 90,000

Other expenses USD 30,000

Below is expected level of sales:

Container A500,000 units at price USD 90 per 100 containers

Container A500,000 units at price USD 130 per 100 containers

Information on finished goods and inventory is provided below:

Expected level on Jan 1 Desired level on Dec 31

Finished goods

Container A 10,000 units 5,000 units

Container B 20,000 units 15,000 units

Raw material

Plastic X 15,000 kg 5,000 kg

Plastic Y 5,000 kg 10,000 kg

Required: Prepare master budget for the next year including income statement.

Expert Solution

MASTER BUDGET
Particulars	Container A	Container B	Computaion of total value	Total value
Expected sales unit	500000	500000	(500000/10090)+(500000/100130)	1100000
Add:Desired closing stock on December 31	5000	15000
Total	505000	515000
Less:Opening stock on January 1	10000	20000
Production units	495000	495000	Total Sales (A)	1100000
Direct material&Labour requirement per 100 container
Plastic X( A 30 Kg/B 70 kg)	148500	346500	(148500+346500)*0.2 =99000
			Add:Closing stock (5000kg*0.2) = 1000
			100000
			Less :Opening stock(15000kg*0.2) =3000
				97000
Plastic Y (A 20kg /B 30 Kg)	99000	148500	(99000+148500)*0.1 =24750
			Add:Closing stock (10000kg*0.1) = 1000
			25750
			Less :Opening stock(5000kg*0.1) =500
				25250
Direct Labour Hour (A-0.25 Hr/B-0.5 Hr)	1237.5	2475	(1237.5+2475)*12	44550
			Total Direct Cost (B)	166800
Manufacturing overhead (Applied based on labour hrs)
Indirect material 10500	3500	7000	Indirect material	10500
Indirect labour 50000	16667	33333	Indirect labour	50000
Utilities 25000	8333	16667	Utilities	25000
			Total manufaturing cost (C )	85500
			Property taxes	18000
			Insurance	16000
			Depreciation	29000
			Total fixed cost (D)	63000
			Salaries	75000
			Advertising	15000
			Management salaries	90000
			Other expense	30000
			Total selling & administration expense(E)	210000
Operating profit A-(B+C+D+E)	574700

ekkarill92 answered 2 years ago

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