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

Calculation of manufacturing cost per unit :

(a) Predetermined overhead rate = budgeted manufacturing overhead / volume of direct labour hours

= 211410 / 3645 = $58 per hour

(b) Calculation of manufacturing cost per unit :

4. Direct labour budget Box C Box P Total Production requirements (number of boxes) 405000 405000 Direct labour required per box (hours) * 0.003 * 0.006 Direct labour required for production (hours) 1215 2430 3645 Direct labour rate * $16 Total direct labour cost $58320

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