Gannon Corporation manufactures two types of cardboard boxes used in shipping ca

Question

Gannon 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 ar labor requirements Type of Box Direct material required per 100 boxes Paperboard (S.20 per pound) Corrugating medium (S.10 per pound) Direct labor required per 100 boxes ($12.00 per hour) 25 hour 70 pounds 30 pounds hour 30 pounds 20 pounds The following production-overhead costs are anticipated for the next year. The predetermined overhead . based on a production volume of 495,000 units for cach type of box. Production overhead is applied on t basis of direct-labor hours Indirect material S 10,500 50,000 25,000 Property taxes 18,000 16,000 29,000 5148,500 Indirect labor Utilities Insurance Total The following selling and administrative expenses are anticipated for the next year Salaries and fringe benefits of sales personnel Management salaries and fringe benefits Clerical wages and fringe benefits Miscellaneous administrative expenses Total 75,000 15,000 90,000 26,000 4,000 $210,000 The sales forecast for the next year is as follows: Sales Volume Sales Price ox type C 500,000 boxes S 90.00 per hundred boxes ox type P 500,000 boxes 130.00 per hundred boxes

Explanation / Answer

Answer 1. Gannon Ccorporation Sales Budget Product & Area Unit Sale Volume Unit Selling Price Total Sales Box Type C           500,000                     0.90              450,000 Box Type P           500,000                     1.30              650,000 Total Revenue from Sales           1,100,000 Answer 2. Production Budget Units Box Type C Box Type P Expected units to be sold           500,000              500,000 Plus: Desired Ending Inventory                5,000                 15,000 Total Needs           505,000              515,000 Less: Estimated Beginning Inventory           (10,000)              (20,000) Total Units to be Produced           495,000              495,000 Answer 3. Direct Materials Purchases Budget Paperboat Corrugating Medium Total Required Units for Production: Box Type C             148,500                 99,000 Box Type P           346,500              148,500 Plus: Desired Ending Inventory                5,000                 10,000 Total           500,000              257,500 Less: Estimated Beginning Inventory           (15,000)              (50,000) Total Units to be Purchased           485,000              207,500 Unit Price                  0.20                     0.10 Total Direct Materials to be purchased             97,000                 20,750              117,750 Answer 4. Direct Labor Cost Budget Total Hours Required for Production: Box Type C            1,237.50 Box Type P          2,475.00 Total          3,712.50 Hourly Rate                      12 Total Direct Labor Cost             44,550

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