Problem 9-42

1. Sales Budget
Box Type C Box Type P

Sales Volume 500,000 boxes 500,000

Sales Price x $0.9 x $1.3
$450,000 $650,000

2. Production Budget (in unit)

Sales 500,000 boxes 500,000 boxes

Add: Desired Ending 5000 boxes 15,000 boxes
Inventory
Totals unit needed 505,000 boxes 515,000 boxes
Deduct: Beginning Inventory (10,000 boxes) (20,000 boxes)
Production Requirements 495,000 boxes 495,000 boxes

3. Direct-material Budget

Paperboard
Box to be produce 495,000 boxes 495,000 boxes
Raw material required per x 0.3 x 0.7
box (pounds)
Raw material required per 148,500 346,500
production (pounds)
Add: Desired ending raw
material inventory
Total raw material needs
Deduct: Beginning raw material
inventory
Raw material to be purchased
Price ( per round )
Cost of purchased ( paperboard )

Corrugating Medium
Box to be produce 495,000 boxes 495,000 boxes
Raw material required per x 0.2 x 0.3
box (pounds)
Raw material required per 99,000 148,500
production (pounds)
Add: Desired ending raw
material inventory
Total raw material needs
Deduct: Beginning raw material
inventory
Raw material to be purchased
Price ( per round )
Cost of purchased ( paperboard )

4. Direct-labor budget
Production requirements 495,000 495,000
(number of boxes)
Direct labor required per box 0.0025 0.005
(hours) 1237.5 2475
Direct-labor rate
Total direct labor cost

5. Production-overhead budget

Indirect Material
Indirect Labor
Utilities
Property Taxes
Insurances
Depreciation
Total Overhead

6. Selling and Administrative Expense Budget

Salaries and fringe benefits of sales personnel

Advertising
Management salaries and fringe benefits
Clerical wages and fringe benefits
Miscellaneous administrative expenses
Total selling and administrative expenses

7. Budgeted income statement

Sales revenue
Less: Cost of good sold: *
Box C : 500,000 x $0.21 $105,000
Box P : 500,000 x $0.43 215,000
Gross margin
Selling and administrative expenses
Income before taxes
Income taxes expense (40%)
Net Income

*Cost of good sold

a) Predetermination overhead rate = Budgeted manufacturing overhead

volume of direct labor hours

= $148,500
(495,000)(0.0025) x (495,000)(0.0050)

= $148,500
3712.5 hours

= $40 hours

b) Calculation of manufacturing cost per unit

Box C Box P
Direct Material:
Paperboard
0.3lb x $0.20 per lb $0.06
0.7lb x $0.20 per lb $0.14
Corrugating medium
0.2lb x $0.10 per lb 0.02
0.3lb x $0.10 per lb 0.03
Direct Labor:
0.0025 hr x $12 per hr 0.03
0.0050 hr x $12 per hr 0.06
Applied manufacturing overhead:
0.0025 hr x $40 per hr 0.1
0.0050 hr x $40 per hr 0.2
Manufacturing cost per unit $0.21 $0.43
 Total

$1,100,000

495,000

5000

500,000
-15,000

485,000
x 0.2
$97,000

247,500
 10,000

257,500
-5,000

252,500
x 0.1
$25,250

3712.5
x $12
44,550

$
10,500
50,000
25,000
18,000
16,000
29,000
$148,500

$
75,000
15,000
90,000
26,000
4000
$210,000

$1,100,000

$105,000
215,000
 $320,000
$780,000
$210,000
$570,000
$228,000
$342,000

Box P

$0.14

0.03

0.06

0.2
$0.43