Required information Problem 9-42 Preparation of Master Budget (LO 9-3, 9-4, 9-5

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.

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.

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.

Problem 9-42 Part 7

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) 25 pounds 65 pounds Corrugating medium ($0.14 per pound) 15 pounds 25 pounds Direct labor required per 100 boxes ($15.00 per hour) 0.40 hour 0.80 hour

Explanation / Answer

FreshPak Corporation

Budgeted Income Statement

For Next Year

Sales Budget :

$ $ Sales 1,662,500 Cost of Goods Sold Direct Materials 4,750 x $ ( 90 x 0.28) + 4,750 x 40 x 0.14 146,300 Direct Labor 4,750 x ( 0.40 + 0.80) x $ 15 85,500 Production Overhead 4,750 x 1.20 x $ 41 233,700 465,500 Gross Margin 1,197,000 Selling and Administrative Expenses 372,600 Net Operating Income 824,400 Income Tax Expense ( 40%) 329,760 Net Income 494,640

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