Reference no: EM13490280

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 costs for 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.