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. Direct material required per 100 boxes: Type C Type P Paperboard ( $0.20 per pound) 30 pounds 70 pounds Corrugating medium ( $0.10 per pound) 20 pounds 30 pounds Direct labor required per 100 boxes ($12.00 per hour) 0.25 hour 0.50 hour 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. Indirect material $10,500 Indirect labor $50,000 Utilities $25,000 Property taxes $18,000 Insurance $16,000 Depreciation $29,000 Total $148,500 The following selling and administrative expenses are anticipated for the next year. Salaries and fringe benefits of sales personnel $75,000 Advertising $15,000 Management salaries and fringe benefits $90,000 Clerical wages and fringe benefits $26,000 Miscellaneous administrative expenses $4,000 Total $210,000 The sales forecast for the next year is as follows: Sales Volume Sales price Box Type C 500,000 boxes $90.00 per hundred boxes Box Type P 500,000 boxes $130.00 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. Finished goods: Expected Inventory January 1 Desired ending Inventory December 31 Box Type C 10,000 boxes 5,000 boxes Box Type P 20,000 boxes 15,000 boxes Raw Material: Paperboard 15,000 pounds 5,000 pounds Corrugating medium 5,000 pounds 10,000 pounds Prepare a master budget for FreshPak Corporation for the next year. Assume an income tax rate of 40 percent. Include the following schedules. 1) Budgeted income statement. ( Hint: To determine the cost of goods sold, first compute the production cost per unit of each type of box. Include applied production overhead in the cost.)
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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.
| Direct material required per 100 boxes: | Type C | Type P |
| Paperboard ( $0.20 per pound) | 30 pounds | 70 pounds |
| Corrugating medium ( $0.10 per pound) | 20 pounds | 30 pounds |
| Direct labor required per 100 boxes ($12.00 per hour) | 0.25 hour | 0.50 hour |
The following production-
| Indirect material | $10,500 |
| Indirect labor | $50,000 |
| Utilities | $25,000 |
| Property taxes | $18,000 |
| Insurance | $16,000 |
| $29,000 | |
| Total | $148,500 |
The following selling and administrative expenses are anticipated for the next year.
| Salaries and |
$75,000 |
| Advertising | $15,000 |
| Management salaries and fringe benefits | $90,000 |
| Clerical wages and fringe benefits | $26,000 |
| Miscellaneous administrative expenses | $4,000 |
| Total | $210,000 |
The sales
| Sales Volume | Sales price | |
| Box Type C | 500,000 boxes | $90.00 per hundred boxes |
| Box Type P | 500,000 boxes | $130.00 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.
| Finished goods: | Expected Inventory January 1 | Desired ending Inventory December 31 |
| Box Type C | 10,000 boxes | 5,000 boxes |
| Box Type P | 20,000 boxes | 15,000 boxes |
| Raw Material: | ||
| Paperboard | 15,000 pounds | 5,000 pounds |
| Corrugating medium | 5,000 pounds | 10,000 pounds |
Prepare a
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