FreshPak Corporation manufactures two types of cardboard boxes used in shipping

Question

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 Direct material required per 100 boxes: Paperboard ($0.32 per pound) Corrugating medium ($0.16 per pound) 45 pounds 35 pounds 85 pounds 45 pounds Direct labor required per 100 boxes ($16.00 per hour) 0.30 hour 0.60 hour The following production-overhead costs are anticipated for the next year. The predetermined overhead rate is based on a production volume of 405,000 units for each type of box. Production overhead is applied on the basis of direct-labor hours Indirect material Indirect labor Utilities Property taxes Insurance Depreciation Total $ 12,3080 92,110 33,000 22,000 17,000 35,000 $211,410 The following selling and administrative expenses are anticipated for the next year. Salaries and fringe benefits of sales personnel Advertising Management salaries and fringe benefits Clerical wages and fringe benefits Miscellaneous administrative expenses Total $117,000 24,000 138,000 40,500 6.300 $325,800 The sales forecast for the next year is as follows Sales Volume 410,000 boxes 410,000 boxes Sales Price Box type C Box type P $130.00 per hundred boxes 190.00 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 January1 Desired Ending Inventory December 31 Finished goods: Box type C Box type P Raw material: Paperboard 13,000 boxes 23,000 boxes 8,000 boxes 18,000 boxes 16,500 pounds 6,500 pounds 6,500 pounds 11,500 pounds Corrugating medium Prepare a master budget for FreshPak Corporation for the next year. Assume an income tax rate of 35 percent.

Explanation / Answer

Solution:

Part 1 --- Sales Budget

Sales Budget

Box C

Box P

Total

Sales (in units)

410,000

410,000

Selling price per unit

$1.30

$1.90

Sales Revenue

$533,000

$779,000

$1,312,000

Note – Unit Selling Price

Box C = $130 per hundred box it means for 100 boxes the selling price is $130 and for 1 box it is $1.30 (130 / 100)

Box P = $190 per hundred boxes i.e. $1.90 per box (190 / 100)

Part 2 – Production Budget

Production Budget

Box C

Box P

Sales

410,000

410,000

Plus: Desired Ending Inventory Dec 31

8000

18000

Total Units needed

418000

428000

Less: Expected Beginning Inventory Jan 1

13000

23000

Production Requirements

405000

405000

Part 3(a) – Direct material budged for paperboard

Paperboard

Box C

Box P

Total

Production requirements (number of boxes)

405000

405000

Raw material required per box (pounds)

0.45

0.85

Raw material required for production (pounds)

182250

344250

526500

Plus: Desired Ending Inventory Raw material

6500

Total raw materials need

533000

Less: Beginning direct materials pound

16500

Raw material to be purchased

516500

Price (per pound)

$0.32

Cost of purchases (paperboard)

$165,280

Part 3(b) – Corrugating Medium

Corrugating Medium

Box C

Box P

Total

Production requirements (number of boxes)

405000

405000

Raw material required per box (pounds)

0.35

0.45

Raw material required for production (pounds)

141750

182250

324000

Plus: Desired Ending Inventory Raw material

11500

Total raw materials need

335500

Less: Beginning direct materials pound

6500

Raw material to be purchased

329000

Price (per pound)

$0.16

Cost of purchases (Corrugating Medium)

$52,640

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining parts.

Sales Budget

Box C

Box P

Total

Sales (in units)

410,000

410,000

Selling price per unit

$1.30

$1.90

Sales Revenue

$533,000

$779,000

$1,312,000

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