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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

C P

Direct material required per 100 boxes:

Paperboard ($0.32 per pound) 30 pounds 70 pounds

Corrugating medium ($0.16 per pound) 20 pounds 30 pounds

Direct labor required per 100 boxes ($16.00 per hour) 0.20 hour 0.40 hour

The following production-overhead costs are anticipated for the next year. The predetermined overhead rate is based on a production volume of 475,000 units for each type of box. Production overhead is applied on the basis of direct-labor hours.

Indirect material $ 14,400

Indirect labor 64,000

Utilities 48,000

Property taxes 32,000

Insurance 25,000

Depreciation 56,000

Total $ 239,400

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

Salaries and fringe benefits of sales personnel $ 138,000

Advertising 31,000

Management salaries and fringe benefits 152,000

Clerical wages and fringe benefits 47,500

Miscellaneous administrative expenses 7,700

Total $ 376,200

The sales forecast for the next year is as follows:

Sales Volume Sales Price

Box type C 480,000 boxes $ 120.00 per hundred boxes

Box type P 480,000 boxes 180.00 per hundred boxes

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.

Expected Inventory January 1 Desired Ending Inventory December 31

Finished goods:

Box type C 16,500 boxes 11,500 boxes

Box type P 26,500 boxes 21,500 boxes

Raw material:

Paperboard 16,500 pounds 6,500 pounds

Corrugating medium 7,500 pounds 12,500 pounds

Prepare a master budget for FreshPak Corporation for the next year. Assume an income tax rate of 35 percent.

2. Prepare the production budget for the next year.

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