h Box Corporation manufactures two types of cardboard boxes used in shipping Edg

Question

h Box Corporation manufactures two types of cardboard boxes used in shipping Edgewort 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 Bax Direct material required per 100 bous 20 pounds 30 pounds Cornugatng medium (3.15 per pound Paperboand ($30 per pound Direct labor required per 100 boxes ($18.00 per hour)n 25 hour 50 hour The unit production costs for each product are expected to be the same this year and next year. The following production-overhead costs are anticipated for the next year. The predetermined overhead rate is based on a production volume of 495,000 units for each type of box. Production overhead is applied on the basis of direct-labor hours. hdirect material Indrect labor 15,750 75,000 37,500 27,000 24,000 43,500 $222,750 Property tares nsurance Total The following selling and administrative expenses are anticipated for the next year Salaries and tringe benelits of sales personne Advertsing Management salaries and tringe benefis Clerical wages and tringe benerts Viscellaneous administaltive experis Total $112.500 22.500 135,000 39,000 6,000 315.000 The sales forecast for the next year is as follows: Sales Price Sales Volume 500 000 boaas 500000 boaes $135 per hundred boones Boa tpe c Box hye P The tollowing inventory information is available for the next year 195 per tundred bowe Expected InventoryDesired Ending Imventory January 1 December 31 Fnished good 10,000 bou 20.000 bones 5,000 baxas 15,000 box Bor type C Bar type P 5,000 pound 15,000 pounds 10,000 pounds 5,000 pounds Cornugating medu Required: Prepare a master butget for Edgeworth Box Corporation for the next year. Assume an income tax rate of 35 percent Include the following schedules 1. Sales budget 2. Production budget 3. Direct-matenal budget 4. Direct-labor budget 5. Production-ovemead budget 6. Seling and administrative expense budget 7. Budgeted income statement (Hint To determine cost of goods sold, first compute the production cost per unid tor each type of box. Include applied production overhead in the cost Carry these calculations to three decimal places)

Explanation / Answer

Answer -

EDGEWORTH BOX CORPORATION Master Budget 1. Sales Budget: Box C Box P Total Sales (in units)    500,000           500,000     Sales price per unit $     1.35     $        1.95     Sales revenue $675,000     $   975,000     $1,650,000 2. Production Budget (in units): Box C Box P Sales    500,000           500,000     Add: Desired ending inventory       5,000            15,000     Total units needed    505,000           515,000     Deduct: Beginning inventory      10,000            20,000     Production requirements    495,000           495,000     3. Raw material budget: PAPERBOARD Box C Box P Total Production requirements (number of boxes)    495,000           495,000     Raw material required per box (pounds)         0.30                0.70     Raw material required for production (pounds)    148,500           346,500           495,000 Add: Desired ending raw-material inventory          5,000 Total raw-material needs       500,000 Deduct: Beginning raw-material inventory        15,000 Raw material to be purchased       485,000 Price (per pound) $        0.30 Cost of purchases (paperboard) $   145,500 CORRUGATING MEDIUM Box C Box P Total Production requirements (number of boxes)    495,000           495,000     Raw material required per box (pounds)         0.20                0.30     Raw material required for production (pounds)      99,000           148,500           247,500 Add: Desired ending raw-material inventory        10,000 Total raw-material needs       257,500 Deduct: Beginning raw-material inventory          5,000 Raw material to be purchased       252,500 Price (per pound) $        0.15 Cost of purchases (corrugating medium) $     37,875 Total cost of raw-material purchases $   183,375 4. Direct labor budget: Box C Box P Total Production requirements (number of boxes)    495,000           495,000     Direct labor required per box (hours)      0.0025            0.0050     Direct labor required for production (hours)     1,237.5           2,475.0           3,712.5 Direct-labor rate $           18 Total direct-labor cost $     66,825 5. Production overhead budget: Indirect material $15,750     Indirect labor      75,000     Utilities      37,500     Property taxes      27,000     Insurance      24,000     Depreciation      43,500     Total overhead $222,750     7. Selling and Administrative Budget Selling Expense: Salaries and Fringe benefit for sales    112,500 Advertising Expense       22,500 Total Selling Expense      135,000 Administration Expense: Management Salaries and Fring benefit    135,000 Clerical Wages and fring benefit       39,000 Miscellaneous administrative expense         6,000 Total administrative expenses      180,000 Total operating expenses        315,000

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