Reference no: EM13141306

PART 1 
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.