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

Question

[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.

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.

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

The sales forecast for the next year is as follows:

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.

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.)

B. Prepare the production budget for the next year.

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

b. Prepare the direct-material budget for 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.)

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

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

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

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

Explanation / Answer

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

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