Comprehensive review of budgeting. British Beverages bottles two soft drinks under licence to Cadbury Schweppes at its Manchester plant. Bottling at this plant is a highly repet¬

itive, automated process. Empty bottles are removed from their carton, placed on a conveyor, and sterilized, rinsed, dried, fdled, capped, and heated (to reduce condensation). All inventory is in direct materials and finished goods at the end of each working day. There is no workin-process inventory.

The two soft drinks bottled by British Beverages are lemonade and diet lemonade. The syrup for both soft drinks is purchased from Cadbury Schweppes. Syrup for the regular brand contains a higher sugar content than the syrup for the diet brand.

British Beverages uses a lot size of 1,000 cases as the unit of analysis in its budgeting.

(Each case contains 24 bottles.) Direct materials are expressed in terms oflots, where one lot of direct materials is the input necessary to yield one lot (1,000 cases) of beverage. In 2008, the following purchase prices are forecast for direct materials:

Lemonade Diet Lemonade Syrup $ 1,440 per lot $ 1,3 2 0 per lot Containers (bottles, caps, etc.) $1,200 per lot $1,200 per lot Packaging $ 960 per lot $ 960 per lot The two soft drinks are bottled using the same equipment.The equipment is sanitized daily, but it is only rinsed when a switch is made during the day between diet lemonade and lemonade.

Diet lemonade is always bottled first each day to reduce the risk ofsugar contamination. The only difference in the bottling process for the two soft drinks is the syrup.

Summary data used in developing budgets for 2008 are as follows:

a. Sales Lemonade, 1,296 lots at $10,800 selling price per lot Diet lemonade, 648 lots at $10,200 selling price per lot

b. Beginning (January 1, 2008) inventory of direct materials Syrup for lemonade, 80 lots at $1,320 purchase price per lot Syrup for diet lemonade, 70 lots at $1,200 purchase price per lot Containers, 200 lots at $1,140 purchase price per lot Packaging, 400 lots at $1,080 purchase price per lot

c. Beginning (January 1, 2008) inventory of finished goods Lemonade, 100 lots at $6,360 per lot Diet lemonade, 50 lots at $6,240 per lot

d. Target ending (December 31, 2008) inventory of direct materials Syrup for lemonade, 30 lots Syrup for diet lemonade, 20 lots Containers, 100 lots Packaging, 200 lots

e. Target ending (December 31, 2008) inventory offinished goods Lemonade, 20 lots Diet lemonade, 10 lots

f. Each lot requires 20 direct manufacturing labour-hours at the 2008 budgeted rate of $30 per hour. Indirect manufacturing labour costs are included in the manufacturing overhead forecast.

g. Variable manufacturing overhead is forecast to be $720 per hour of bottling time; bottling time is the time the filling equipment is in operation. It takes two hours to bottle one lot of lemonade and two hours to bottle one lot of diet lemonade.

Fixed manufacturing overhead is forecast to be $1,440,000 for 2008.

h. Hours of budgeted bottling time is the sole allocation base for all fixed manufacturing overhead.

i.Administration costs are forecast to be 10% of the cost of goods manufactured for 2008.
Marketing costs are forecast to be 12% of dollar sales for 2008. Distribution costs are forecast to be 8% of dollar sales for 2008.
Required Assume British Beverages uses the first-in, first-out method for costing all inventories. Based on the preceding data, prepare the following budgets for 2008:
1. Revenue budget (in dollars)
2. Production budget (in units)
3. Direct materials usage budget (in units and dollars)
4. Direct materials purchases budget (in units and dollars)
5. Direct manufacturing labour budget 6. Manufacturing overhead costs budget 7. Ending inventory budget (direct materials and finished goods)
8. Cost of goods sold budget 9. Marketing costs budget 10. Distribution costs budget 11. Administration costs budget 12. Budgeted income statement