Managerial Accounting: P9-39 Edgeworth Box Corporation manufactures two types of cardboard boxes

Managerial Accounting

Problem 9–39 Preparation of Master Budget
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 ($.15 per pound) 20 pounds 30 pounds
Paperboard ($.30 per pound) 30 pounds 70 pounds
Direct labor required per 100 boxes ($18.00 per hour) 0.25 hour 0.50 hour
The following manufacturing-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. Manufacturing overhead is applied on the basis of direct-labor hours.
Indirect material 15,750
Indirect labor 75,000
Utilities 37,500
Property taxes 27,000
Insurance 24,000
Depreciation 43,500
Total 222,750
The following selling and administrative expenses are anticipated for the next year.
Salaries and fringe benefits of sales personnel 112,500
Advertising 22,500
Management salaries and fringe benefits 135,000
Clerical wages and fringe benefits 39,000
Miscellaneous administrative expenses 6,000
Total 315,000
The sales forecast for the next year is as follows:
Sales Volume Sales Price
Box type C 500,000 boxes $135 per hundred boxes
Box type P 500,000 boxes $195 per hundred boxes
The following inventory information is available for the next year.
Expected Inventory Desired Ending Inventory
January 1 December 31
Finished goods:
Box type C 10,000 boxes 5,000 boxes
Box type P 20,000 boxes 15,000 boxes
Raw material:
Corrugating medium 5,000 pounds 10,000 pounds
Paperboard 15,000 pounds 5,000 pounds



Required:
Prepare a master budget for Edgeworth Box Corporation for the next year. Assume an income tax rate of 35 percent. Include the following schedules.
1. Sales budget.
2. Production budget.
3. Direct-material budget.
4. Direct-labor budget.
5. Manufacturing-overhead budget.
6. Selling and administrative expense budget.
7. Budgeted income statement. ( Hint: To determine cost of goods sold, first compute the manufacturing cost per unit for each type of box. Include applied manufacturing overhead in the cost. Carry these calculations to three decimal places.)
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