Problem 9-39 Preparation of Master Budget (LO 9-3, 9-4, 9-5, 9-6) [The...

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Accounting

Problem 9-39 Preparation of Master Budget (LO 9-3, 9-4, 9-5, 9-6)

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Edgeworth Box 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
C P
Direct material required per 100 boxes:
Corrugating medium ($0.14 per pound) 40 pounds 50 pounds
Paperboard ($0.28 per pound) 50 pounds 90 pounds
Direct labor required per 100 boxes ($14.00 per hour) 0.20 hour 0.40 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 465,000 units for each type of box. Production overhead is applied on the basis of direct-labor hours.

Indirect material $ 14,100
Indirect labor 66,470
Utilities 45,000
Property taxes 30,000
Insurance 23,000
Depreciation 53,000
Total $ 231,570

The following selling and administrative expenses are anticipated for the next year.

Salaries and fringe benefits of sales personnel $ 135,000
Advertising 30,000
Management salaries and fringe benefits 150,000
Clerical wages and fringe benefits 46,500
Miscellaneous administrative expenses 7,500
Total $ 369,000

The sales forecast for the next year is as follows:

Sales Volume Sales Price
Box type C 470,000 boxes $ 140 per hundred boxes
Box type P 470,000 boxes 200 per hundred boxes

The following inventory information is available for the next year.

Expected Inventory January 1 Desired Ending Inventory December 31
Finished goods:
Box type C 14,500 boxes 9,500 boxes
Box type P 24,500 boxes 19,500 boxes
Raw material:
Corrugating medium 6,500 pounds 11,500 pounds
Paperboard 15,500 pounds 5,500 pounds

Prepare a master budget for Edgeworth Box Corporation for the next year. Assume an income tax rate of 40 percent. Include the following schedules.

1. Create a budgeted income statement

Sales Revenue $

Less: COGS $

Gross Margin $

Selling and Admin. expenses $

Income Before taxes $

Income Tax Expenses $

Net Income $

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