Question

Required information Problem 9-42 Preparation of Master Budget (LO 9-3, 9-4, 9-5) (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. Type of Box с P Direct material required per 100 boxes: Paperboard ($0.28 per pound) Corrugating medium ($0.14 per pound) Direct labor required per 100 boxes ($15.00 per hour) 25 pounds 15 pounds 0.40 hour 65 pounds 25 pounds 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 Indirect labor Utilities Property taxes Insurance Depreciation Total $ 14,250 60,990 - 46,500 31,000 24,000 54,500 $231, 240 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 $136,500 30,500 151,000 47,000 7,600 $372,600 The sales forecast for the next year is as follows: Sales Volume 475,000 boxes Box type с Box type P Sales Price $145.00 per hundred boxes 205.00 per hundred boxes 475,000 boxes

Answer 1

Working notes: Production Budget Budgeted Sales Add: Closing stock Total Needs Less: Opening stock Budgeted production Box с 475,000 10,500 485,500 15,500 470,000 Box P 475,000 20,500 495,500 25,500 470,000 3 a Total Box P 470,000 0.65 305,500 Direct Material Budget- Paperboard Box C Production requirement (number of boxes) 470,000 Raw material required per box (pounds) 0.25 Raw material required for production (pounds) 117,500 Add: Closing stock Total raw material needs Less: Opening stock Raw material to be purchased Price (per pound) Cost of purchases (Paperboard) 423,000 6,000 429,000 16,000 413,000 $0.28 $115,640 3 b Total Direct Material Budget - Corrugating medium Box C Box P Production requirement (number of boxes) 470,000 470,000 Raw material required per box (pounds) 0.15 0.25 Raw material required for production (pounds) 70,500 117,500 Add: Closing stock Total raw material needs Less: Opening stock Raw material to be purchased Price (per pound) Cost of purchases (Corrugating medium) 188,000 12,000 200,000 7,000 193,000 $0.14 $27,020