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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 ($0.32 per pound)		50	pounds			90	pounds
Corrugating medium ($0.16 per pound)		40	pounds			50	pounds
Direct labor required per 100 boxes ($16.00 per hour)		0.35	hour			0.70	hour

The following production-overhead costs are anticipated for the next year. The predetermined overhead rate is based on a production volume of 440,000 units for each type of box. Production overhead is applied on the basis of direct-labor hours.

Indirect material	$	13,350
Indirect labor		91,650
Utilities		37,500
Property taxes		25,000
Insurance		18,000
Depreciation		45,500
Total	$	231,000

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

Salaries and fringe benefits of sales personnel	$	127,500
Advertising		27,500
Management salaries and fringe benefits		145,000
Clerical wages and fringe benefits		44,000
Miscellaneous administrative expenses		7,000
Total	$	351,000

The sales forecast for the next year is as follows:

	Sales Volume				Sales Price
Box type C		445,000	boxes		$	115.00	per hundred boxes
Box type P		445,000	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	20,000	boxes		15,000	boxes
Box type P	30,000	boxes		25,000	boxes
Raw material:
Paperboard	13,000	pounds		3,000	pounds
Corrugating medium	4,000	pounds		9,000	pounds

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

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

Sales Revenue: 1,290,500 (correct answer)

Less cost of good sold: ???

Gross Margin: ???

Selling and administrative expenses: 351,00 (correct answer)

income before taxes: ???

income tax expense: ???

Answer 1

	FreshPak Corporation
Requirement 1      Preparation of Master Budget
	Sales Budget
	Particuler	Box C	Box P	Total
	Units	445000	445000
	Selling Price in $	1.15	1.75
	Total Sales Revene	511750	778750	1290500
	Manufacturing Budget
	Particuler	Box C	Box P
	Beginning Inventory estimated	20000	30000
	Units to be sold	445000	445000
	Units available for sale	465000	475000
	Closing Inventory Desired	15000	25000
	Units to be Manufactured	440000	450000
	Raw Materials budget	Box C	Box P	Total
	Units to be manufactured	440000	450000
		(in Pounds)
	Paperboard	220000	405000
	Corrugating Medium	176000	225000
	Total	396000	630000
	Add : Ending Inventory	3000	9000
	Total Raw material needed	399000	639000
	Less : Beginning Inventory	13000	4000
	Raw Material to be purchased	386000	635000
	Price per pound	0.32	0.16
	Raw material value	123520	101600	225120
	Raw Material consumed Value	140800	72000	212800
	Direct Labor budget	Box C	Box P	Total
	Units to be Manufactured	440000	450000
	Direct labor required per 100 boxes	0.35	0.7	hours
	Direct labor hours required	1540	3150
	Direct labor rate per hour	16	16
	Total direct labor	24640	50400	75040
	Overhead budget	Box C	Box P	Total
	Production volume	440000	440000
	Direct labor per 100 boxes	0.35	0.7
	Labor hours required	1540	3080	4620
	Total expected production overhead	77000	154000	231000
	Production overhead per 100 boxes	17.5	35	50
	Selling & adminstrative expenses budget
	Salaries and fringe benefits of sales personnel	127500
	Advertising	27500
	Management salaries and fringe benefits	145000
	Clerical wages and fringe benefits	44000
	Miscellaneous administrative expenses	7000
	Total	351000
Requirement 2
	Budgeted Income statement
	Sales		1290500
	Less : Cost of goods sold
	Direct Material consumed	212800
	Direct Labor	75040
	Overhead	231000
	Total cost of goods sold		518840
	Selling & adminstrative expenses		351000
	Income before taxes		167840
	Income tax expense	@40%	67136
	Net Income		100704