yummy pop ltd prepare revenues budget production budget direct manufacturing labour 323856

Aug 29, 2021 | Uncategorized

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:

  1. Revenues budget
  2. Production budget in units
  3. Direct material usage budget and direct material purchases budget
  4. Direct manufacturing labour cost budget
  5. Manufacturing overhead cost budgets for processing and set up activities
  6. Budgeted unit cost of ending finished goods inventory and ending inventories budget
  7. Budgeted income statement.

PART 2

Go to: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=321520

http://www.bbrt.org/beyond budgeting/bb probleml

“Budgeting Gamesmanship” – posted on your site.

“Why Incentive Plans Cannot Work”—posted on your site.

Critically review the above. Do you agree, partly agree or disagree with the issues raised in the above? Discuss your reason (s) for doing so. You need to support your viewpoint with carefully chosen and authoritative evidence.

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