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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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