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 A​500,000 units at price USD 90 per 100 containers
Container A​500,000 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.

Solutions

Expert Solution

MASTER BUDGET
Particulars Container A Container B Computaion of total value Total value
Expected sales unit 500000 500000 (500000/100*90)+(500000/100*130) 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

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