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Prepare revenues budget
Course:- Cost Accounting
Reference No.:- EM13435




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Yummy-Pop Ltd makes lollipops in two sizes, large and giant. The company sells these lollipops to convenience stores, fairs, schools for fundraisers, and in bulk on the Internet.

Summer is approaching and Yummy-Pop is preparing its budget for the month of December 2013. The lollipops are hand-made, mostly out of sugar and attached to wooden sticks. Expected sales are based on past experience.

Other information for the month of December follows:

Input prices

Direct materials

 

          Sugar

$0.50 per kilogram (kg)

          Sticks

$0.30 each

Direct manufacturing labour

$8 per direct manufacturing labour-hour

Input quantities per unit of output

Direct materials

Large

Giant

Sugar

0.25 kg 

0.5 kg

Sticks

1

1

Direct manufacturing labour-hours (DMLH)

0.2 hour              

0.25 hour

Set-up hours per batch

0.08 hour

0.09 hour

Inventory information, direct materials

 

Sugar

Sticks

Beginning inventory

125 kg

350

Target ending inventory

240 kg

480

Cost of beginning inventory

$64

$105

Yummy-Pop accounts for direct materials using a FIFO cost flow assumption.

Sales and inventory information, finished goods

 

Large

Giant

Expected sales in units

3000

1800

Selling price

$3

$4

Target ending inventory in units

300

180

Beginning inventory in units

200

150

Beginning inventory in dollars

$500

$474

Yummy-Pop uses a FIFO cost flow assumption for finished goods inventory.

All the lollipops are made in batches of 10. Yummy-Pop incurs manufacturing overhead costs, and marketing and general administration costs, but customers pay for shipping. Other than manufacturing labour costs, monthly processing costs are very small.

Yummy-Pop uses activity-based costing and has classified all overhead costsfor the month of December as shown in the following chart:

Cost type

Denominator activity

Rate

Manufacturing:

 

 

         Set-up

Set-up hours

$20 per set-up hr

         Processing

Direct manufacturing labour-hours (DMLH)

$1.70 per DMLH

Non-manufacturing:

 

 

         Marketing and general administration

Sales revenue

10%

Required:

Prepare each of the following for December 2013:

a. Revenues budget

b. Production budget in units

c. Direct material usage budget and direct material purchases budget

d. Direct manufacturing labour cost budget

e. Manufacturing overhead cost budgets for processing and set-up activities

f. Budgeted unit cost of ending finished goods inventory and ending inventories budget

g. Budgeted income statement.




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