In: Accounting
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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 ($0.40 per pound) | 35 | pounds | 75 | pounds | |||
Corrugating medium ($0.20 per pound) | 25 | pounds | 35 | pounds | |||
Direct labor required per 100 boxes ($20.00 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 425,000 units for each type of box. Production overhead is applied on the basis of direct-labor hours.
Indirect material | $ | 12,900 | |
Indirect labor | 54,600 | ||
Utilities | 33,000 | ||
Property taxes | 22,000 | ||
Insurance | 15,000 | ||
Depreciation | 41,000 | ||
Total | $ | 178,500 | |
The following selling and administrative expenses are anticipated for the next year.
Salaries and fringe benefits of sales personnel | $ | 123,000 | |
Advertising | 26,000 | ||
Management salaries and fringe benefits | 142,000 | ||
Clerical wages and fringe benefits | 42,500 | ||
Miscellaneous administrative expenses | 6,700 | ||
Total | $ | 340,200 | |
The sales forecast for the next year is as follows:
Sales Volume | Sales Price | ||||||
Box type C | 430,000 | boxes | $ | 115.00 | per hundred boxes | ||
Box type P | 430,000 | boxes | 175.00 | 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 | 17,000 | boxes | 12,000 | boxes | |
Box type P | 27,000 | boxes | 22,000 | boxes | |
Raw material: | |||||
Paperboard | 18,500 | pounds | 8,500 | pounds | |
Corrugating medium | 8,500 | pounds | 13,500 | pounds | |
Prepare a master budget for FreshPak Corporation for the next year. Assume an income tax rate of 30 percent.
Prepare the budgeted income statement for the next year. (Do not round intermediate calculations.)
Prepare the budgeted income statement for the next year. (Do not round intermediate calculations.)
Sales Budget | ||||
Box Type C | Box Type P | Total | ||
Budgeted Unit Sales | 430000 | 430000 | ||
Selling price per 100 units | 115 | 175 | ||
Budgeted Sales | 494500 | 752500 | 1247000 | |
Production budget | ||||
Box Type C | Box Type P | |||
Budgeted Unit Sales | 430000 | 430000 | ||
Plus: Ending inventory | 12000 | 22000 | ||
Total Units Needed | 442000 | 452000 | ||
Less: Beginning Inventory | 17000 | 27000 | ||
Budgeted Production units | 425000 | 425000 | ||
Raw Material Budget | ||||
Box Type C | Box Type P | Total | ||
Budgeted Production units | A | 425000 | 425000 | |
1. Paper Board | ||||
Pounds per 100 boxes | B | 35 | 75 | |
Needed for production (pounds) - A X B | C | 148750 | 318750 | 467500 |
Plus : Ending inventory (pounds) | D | 8500 | ||
Total paper board needed (pounds) - C+ D | E | 476000 | ||
Less: Beginning Inventory | F | 18500 | ||
Paper borad purchases (pounds) - E - F | G | 457500 | ||
Price per pound | H | $0.40 | ||
Budgeted Purchase of paper board - G X H | I | 183000 | ||
Budgeted Cost of paper board used (C x H) | J | 59500 | 127500 | 187000 |
2. Corrugated Mediuum | ||||
Pounds per 100 boxes | K | 25 | 35 | |
Needed for production (pounds) - A x K | L | 106250 | 148750 | 255000 |
Plus : Ending inventory (pounds) | M | 13500 | ||
Total paer board needed (pounds) - L + M | N | 268500 | ||
Less: Beginning Inventory | O | 8500 | ||
Corrugated medium purchases (pounds) - N - O | P | 260000 | ||
Price per pound | Q | $0.20 | ||
Budgeted Purchase of corrugated medium - P x Q | R | 52000 | ||
Budgeted Cost of corrugated medium used (L x Q) | S | 21250 | 29750 | 51000 |
Total direct material purchases - I + R | 235000 | |||
Total direct material Consumption - J+S | 80750 | 157250 | 238000 | |
Direct labor budget | ||||
Box Type C | Box Type P | Total | ||
Budgeted Production units | A | 425000 | 425000 | |
Direct labor hours per 100 boxes | B | 0.2 | 0.4 | |
Total direct labor hours needed - A x B | C | 850 | 1700 | 2550 |
Direct Labor per hour | D | $20.00 | ||
Budgeted direct labor cost - C x D | E | 17000 | 34000 | 51000 |
Box Type C | Box Type P | Total | ||
Total Production Overhead | 178500 | |||
Estimated Production | 425000 | 425000 | ||
Direct labor hours per unit | 0.2 | 0.4 | ||
Estimated total direct labor hours | 85000 | 170000 | 255000 | |
predeterimned overhead rate per hour | 0.70 | |||
Budgeted production overhead | 59500 | 119000 | ||
Product cost | ||||
Box Type C | Box Type P | Total | ||
Direct material | 80750 | 157250 | 238000 | |
Direct labor | 17000 | 34000 | 51000 | |
Production overhead | 59500 | 119000 | 178500 | |
Total cost of production | 157250 | 310250 | 467500 | |
Production units | 425000 | 425000 | ||
Cost per unit | $0.37 | $0.73 | ||
Sales units | 430000 | 430000 | ||
Cost of goods sold | 159100 | 313900 | 473000 | |
FRESH PAK CORPORATION | ||||
Budgeted Income statement | ||||
sales | 1247000 | |||
Cost of goods sold | 473000 | |||
Gross Profit | 774000 | |||
Selling and administrative expenses: | ||||
Salaries and benefits of sales personnel | 123000 | |||
Advertising expense | 26000 | |||
Management salaries and fringe benefits | 142000 | |||
Clerical wages and fringebenefits | 42500 | |||
Miscellaneous administrative expenses | 6700 | |||
Total selling and administrative expenses | 340200 | |||
Income before income taxes | 433800 | |||
Income Tax (30%) | 130140 | |||
Net Income | 303660 |