Question

Baci is a well-known lollipops maker in Western Australia and produces lollipops in two size, i.e., regular and large. The company sells their products to convenience stores, fairs, schools for fundraisers and in bulk on the internet. 2018 summer is approaching and Baci is preparing its budget for the December. All Baci’s lollipops are hand-made, mostly out of sugar, and attached to wooden sticks. Expected sales are based on past experience.

Other information for December 2018 is as follows:

Input prices :

Direct materials:

Sugar $0.50 per kg

Sticks $0.30 each

Direct manufacturing labour $8 per direct manufacturing labour hour (DMLH)

Input quantities per unit of output

Regular Large

Direct materials:

Sugar 0.25 kg 0.5 kg

Sticks 1 1

Direct manufacturing labour hour (DMLH) 0.2 hour 0.25 hour

Set-up hours per batch 0.08 hour 0.09 hour

Inventory data for direct materials1

Sugar Sticks

Beginning inventory 125 kg 350

Target ending inventory 240 kg 480

Cost of beginning inventory $64 $105

1: Baci accounts for direct materials using a FIFO cost flow assumption.

Sales and inventory data for finished goods2

Regular Large

Expected sales in units 3,000 1,800

Selling price $3 $4

Target ending inventory in units 300 180

Beginning inventory in units 200 150

Beginning inventory in dollars $500 $474

2: Baci uses a FIFO cost flow assumption for finished goods inventory.

All the lollipops are made in batches of 10. Baci incurs manufacturing overhead cost, and marketing and general administration costs, but customers pay for shipping. Other 3 than manufacturing labour costs, monthly processing costs are very small. Baci uses activity-based costing (ABC) and has classified all overhead costs for December 2018 as follows:

Cost type Denominator activity Rate

Manufacturing:

Set-up Set-up hours $20 per set-up hour

Processing Direct manufacturing labour hour (DMLH) $1.70 per DMLH

Non-manufacturing:

Marketing & general admin Sales revenue 10%

Required 1. Prepare each of the following for December 2018:

(a) Revenue budget

(b) Production budget in units

(c) Direct materials usage budget and direct materials 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) Cost of goods sold budget

(h) Marketing and general administration costs budget

Answer 1

As per our policy, we cannot able to post solution more than four sub parts of question.

Answer 1

Revenue budget - December 2018
Product	Regular	Large	Total
Expected sales in units	3000	1800
Selling price per unit	3	4
Sales revenue ( Expected sales in units * Selling price per unit)	$        9,000	$        7,200	$        16,200

Answer 2

Production budget in units - December 2018
Product	Regular	Large
Expected sales in units	3000	1800
Add: ending finished goods inventory	300	180
Inventory available for sale	3300	1980
Less: Beginning finished goods inventory	200	150
Budgeted production in units	3100	1830

Answer 3

Direct materials usage budget - December 2018
Material	Sugar	Sticks
Budgeted production in Regular units	3100	3100
Direct materials required per unit	0.25	1.00
Direct material used for production of Regular units (Budgeted production in Regular units * Direct materials required per unit )	775	3100
Budgeted production in Large units	1830	1830
Direct materials required per unit	0.50	1.00
Direct material used for production of Large units (Budgeted production in Large units * Direct materials required per unit )	915	1830
Direct material used for production of Regular units	775	3100
Direct material used for production of Large units	915	1830
Total Direct materials usage	1690	4930

Direct materials purchases budget - December 2018
Material	Sugar	Sticks
Total Direct materials usage	1690	4930
Add: ending raw material inventory	240	480
Raw material available for use	1930	5410
Less: Beginning raw material inventory	125	350
Purchase of raw material in Quantity	1805	5060
Direct material cost per Quantity	$          0.50	$          0.30
Cost of purchase raw material inventory (Purchase of raw material in Quantity * Direct material cost per Quantity)	$     902.50	$ 1,518.00

Answer 4

Direct manufacturing labour cost budget - December 2018
Product	Regular	Large	Total
Budgeted production in units	3100	1830
Direct manufacturing labour hour per unit	0.20	0.25
Total Direct manufacturing labour hour (Budgeted production in units * Direct manufacturing labour hour per unit)	620.00	457.50	1077.50
Direct labor cost per hour	$          8.00	$          8.00	$            8.00
Total Direct labor cost (Total Direct manufacturing labour hour * direct labor cost per hour)	$ 4,960.00	$ 3,660.00	$    8,620.00