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Required information [The following information applies to the questions displayed below.] FreshPak Corporation manufactures two types...

Required information

[The following information applies to the questions displayed below.]

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.)

Solutions

Expert Solution

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

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