Question

Required information

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)		25	pounds			65	pounds
Corrugating medium ($0.14 per pound)		15	pounds			25	pounds
Direct labor required per 100 boxes ($15.00 per hour)		0.40	hour			0.80	hour

The following production-overhead costs are anticipated for the next year. The predetermined overhead rate is based on a production volume of 470,000 units for each type of box. Production overhead is applied on the basis of direct-labor hours.

Indirect material	$	14,250
Indirect labor		60,990
Utilities		46,500
Property taxes		31,000
Insurance		24,000
Depreciation		54,500
Total	$	231,240

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

Salaries and fringe benefits of sales personnel	$	136,500
Advertising		30,500
Management salaries and fringe benefits		151,000
Clerical wages and fringe benefits		47,000
Miscellaneous administrative expenses		7,600
Total	$	372,600

The sales forecast for the next year is as follows:

	Sales Volume				Sales Price
Box type C		475,000	boxes		$	145.00	per hundred boxes
Box type P		475,000	boxes			205.00	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	15,500	boxes		10,500	boxes
Box type P	25,500	boxes		20,500	boxes
Raw material:
Paperboard	16,000	pounds		6,000	pounds
Corrugating medium	7,000	pounds		12,000	pounds

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

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

Answer 1

Budgeted Income Statement for FreshhPak Corporation for the period ending 31st December, -----
		Type of Box
		C			P
		Qty	Rate	Amount	Qty	Rate	Amount		Total Amount
Sales		475000	$ 145 Per Hundred Box	688750	475000	$ 205 Per Hundred Box	973750		1662500
Direct Cost		475000	$ 31.5 Per Hundred Box	149625	475000	$ 66.5 Per Hundred Box	315875		465500
Gross Profit				539125			657875		1197000
Less: Selling & Administrative Expense
Salaries and fringe benefits of sales personnel								136500
Advertising								30500
Management salaries and fringe benefits								151000
Clerical wages and fringe benefits								47000
Miscellaneous administrative expenses								7600	372600
Net Profit									824400
Income tax @ 40%									329760
Net Income After Tax									494640

Cost of Goods Sold per Unit
	C			P
	Qty	Rate	Amount	Qty	Rate	Amount
Direct Material
Paperboard	117500	$    0.28	$    32,900.00	305500	$    0.28	$    85,540.00
Corrugating medium	70500	$    0.14	$      9,870.00	117500	$    0.14	$    16,450.00
Direct Labour	1880	$ 15.00	$    28,200.00	3760	$ 15.00	$    56,400.00
Production Overhead			$    77,080.00			$ 154,160.00
Total			$ 148,050.00			$ 312,550.00
Units Produced			470000			470000
Cost per 100 Unit			$            31.50			$            66.50

Statement of Boxes produced during the year
	Type of Boxes
	C	P
Closing Inventory	10500	20500
Sales	475000	475000
Less : Opening Inventory	15500	25500
Quantity Produced	470000	470000
	Type of Box
	C				P
Direct material required per 100 boxes:	Pounds per 100 Box	Qty Produced	Pounds/Hours		Pounds per 100 Box	Qty Produced	Pounds/Hours	Total Material Consumed
Paperboard	25	470000	117500		65	470000	305500	423000
Corrugating medium	15	470000	70500		25	470000	117500	188000
Direct Labour	0.4 Hour	470000	1880		0.8 Hour	470000	3760	5640

Production Overheads
Indirect material	$	14,250
Indirect labor		60,990
Utilities		46,500
Property taxes		31,000
Insurance		24,000
Depreciation		54,500
Total	$	231,240
To be divided based on Direct labour hours
Type of Box		Amount
C	1880	77080
P	3760	154160
	5640	231240