Question

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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 ($0.28 per pound)		50	pounds			90	pounds
Corrugating medium ($0.14 per pound)		40	pounds			50	pounds
Direct labor required per 100 boxes ($14.00 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 465,000 units for each type of box. Production overhead is applied on the basis of direct-labor hours.

Indirect material	$	14,100
Indirect labor		66,470
Utilities		45,000
Property taxes		30,000
Insurance		23,000
Depreciation		53,000
Total	$	231,570

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

Salaries and fringe benefits of sales personnel	$	135,000
Advertising		30,000
Management salaries and fringe benefits		150,000
Clerical wages and fringe benefits		46,500
Miscellaneous administrative expenses		7,500
Total	$	369,000

The sales forecast for the next year is as follows:

	Sales Volume				Sales Price
Box type C		470,000	boxes		$	140.00	per hundred boxes
Box type P		470,000	boxes			200.00	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	14,500	boxes		9,500	boxes
Box type P	24,500	boxes		19,500	boxes
Raw material:
Paperboard	15,500	pounds		5,500	pounds
Corrugating medium	6,500	pounds		11,500	pounds

Prepare a master budget for FreshPak Corporation for the next year. Assume an income tax rate of 40 percent.

A. Prepare the sales budget for the next year. (Round "Sales price per unit" to 2 decimal places.)

	Box C Box P Total Sales (in units) Sales price per unit Sales revenue $0 $0 $0

B. Prepare the production budget for the next year.

	Box C Box P Sales Total units needed Production requirements

C. a.Prepare the direct-material budget for paperboard.

b. Prepare the direct-material budget for corrugating medium.

	Paperboard Box C Box P Total Production requirement (number of boxes) Raw material required per box (pounds) 0.50 0.90 Raw material required for production (pounds) 5,500 Total raw-material needs Raw material to be purchased Price (per pound) $0.28 Cost of purchases (paperboard)

	Corrugating Medium Box C Box P Total Production requirements (number of boxes) Raw material required per box (pounds) 0.40 0.50 Raw material required for production (pounds) 11,500 Total raw-material needs Raw material to be purchased Price (per pound) $0.14 Cost of purchases (corrugating medium)

D. Prepare the direct-labor budget for the next year. (Do not round intermediate calculations. Round "Direct labor required per box (hours)" to 4 decimal places.)

	Box C Box P Total Production requirements (number of boxes) Direct labor required per box (hours) Direct labor required for production (hours) Direct-labor rate Total direct-labor cost

E. Prepare the production-overhead budget for the next year.

	Total production overhead $0

F. Prepare the selling and administrative expense budget for the next year.

	Total selling and administrative expenses $0

G. Prepare the budgeted income statement for the next year. (Do not round intermediate calculations.)

Answer 1

	Box C	Box P	Total
Sales in Units	470000	470000
Sales Price PU	1.40	2.00
Sales Revenue	658000	940000	1598000
	Box C	Box P
Sales in Units	4,70,000	4,70,000
Add: Desired Inventory	9,500	19,500
Total Needs	4,79,500	4,89,500
Less: Opening Inventory	14500	24500
Production Requirement	4,65,000	4,65,000
Paperboard
	Box C	Box P	Total
Production requirement (number of boxes)	4,65,000	4,65,000
Raw material required per box (pounds)	0.50	0.90
Raw material required for production (pounds)	232500	418500	651000
Add: Desired Inventory			5,500
Total raw-material needs			656500
Less: Opening Inventory			15500
Raw material to be purchased			641000
Price (per pound)			0.28
Cost of purchases (paperboard)			179480
Corrugating Medium
	Box C	Box P	Total
Production requirement (number of boxes)	4,65,000	4,65,000
Raw material required per box (pounds)	0.40	0.50
Raw material required for production (pounds)	186000	232500	418500
Total raw-material needs			11,500
Total raw-material needs			430000
Less: Opening Inventory			6500
Raw material to be purchased			423500
Price (per pound)			0.14
Cost of purchases (Corrugating Medium)			59290
	Box C	Box P	Total
Production requirements (number of boxes)	4,65,000	4,65,000
Direct labor required per box (hours)	0.002	0.004
Direct labor required for production (hours)	930	1860	2790
Direct-labor rate			14
Total direct-labor cost			39060
Production Overhead	Amount
Indirect material	14100
Indirect labor	66470
Utilities	45000
Property taxes	30000
Insurance	23000
Depreciation	53000
Total production overhead	231570
Selling & Administrative Overhead	Amount
Salaries and fringe benefits of sales personnel	135000		Overhead:	231570
Advertising	30000		Basis			Hours
Management salaries and fringe benefits	150000		Box C	4650	0.20	930
Clerical wages and fringe benefits	46500		Box P	4650	0.40	1860
Miscellaneous administrative expenses	7500					2790
Total	369000		Overhead:	231570
			DLHs	2790
Budgeted Income Statement:	Amount		Recovery Rate Per DLH	83.00
Sales	1598000		DLHS	2820
Less: Costs:			Production OH Applied	234060
Direct Material Cost	243460
Direct Labor Cost	39480
Production OH	234060			Box C	Box P
S&A Expense	369000		Sales in Units	4,70,000	4,70,000
Total Costs	886000		Batch	4700	4700
Net Income	712000
			DM: Paperboard	50	90
			DM: Corru	40	50
				Requirement	Requirement	Total	Rate
			DM: Paperboard	235000	423000	658000	0.28	184240
			DM: Corru	188000	235000	423000	0.14	59220
								243460
			Direct Labor	0.20	0.40
			Direct Labor Hours	940	1880	2820
			Rate	14	14
				13160	26320	39480