Comprehensive review of budgeting. The two soft drinks bottled by British Beverages are Units to be produced: ginger ale and diet ginger ale. The syrup for : both s!o ft drinks is purchased from Cadbury 1,216 ginger ale; 608 diet Schweppes. Syrup for the regular brand contains a higher sugar content than the syrup for ginger ale the diet brand. .

British Beverages bottles the two soft drinks under licence to Cadbury Schweppes at its Manchester plant. Bottling at this plant is a highly repetitive, automated process. Empty bottles are removed from their carton, placed on a conveyor, sterilized, rinsed, dried, filled, capped, and heated (to reduce condensation). All inventory consists of direct materials and finished goods at the end of each working day. There is no work-in-process inventory.

British Beverages uses a lot size of 2,000 cases as the unit of analysis in its budgeting.

(Each case contains 24 bottles.) Direct materials are expressed in terms of lots, where one lot of direct materials is the input necessary to yield one lot (2,000 cases) of beverage. In 2010, the following purchase prices are forecast for direct materials:

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 ginger ale and ginger ale production. Diet ginger ale is always bottled first each day to reduce the risk of sugar contamination. The only difference in the bottling process for the two soft drinks is the syrup.
Summary data used in developing budgets for 2010 are as follows:

a. Sales ® Ginger ale, 1,296 lots at £10,800 selling price per lot ® Diet ginger ale, 648 lots at £10,200 selling price per lot

b. Beginning January 1, 2010) inventory of direct materials ® Syrup for ginger ale, 80 lots at £1,320 purchase price per lot ® Syrup for diet ginger ale, 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, 2010) inventory of finished goods ® Ginger ale, 100 lots at £6,360 per lot ® Diet ginger ale, 50 lots at £6,240 per lot *

d. ‘Target ending (December 31, 2010) inventory of direct materials ® Syrup for ginger ale, 30 lots ® Syrup for diet ginger ale, 20 lots @ Containers, 100 lots ® Packaging, 200 lots

e. Target ending (December 31, 2010) inventory of finished goods ® Ginger ale, 20 lots ® Diet ginger ale, 10 lots

f. Each lot requires 20 direct manufacturing labour-hours at the 2010 budgeted rate of £30 per hour. Indirect manufacturing labour costs are included in the manufacturing overhead 298 | cuapters 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 ginger ale and two hours to bottle one lot of diet ginger ale. Fixed manufacturing overhead is forecast to be 1,440,000 for 2010. 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 2010. Marketing costs are forecast to be 12% of dollar sales for 2010. Distribution costs are forecast to be 8% of dollar sales for 2010. REQUIRED Assume that British Beverages applies FIFO for costing all inventories and prepare the fol- lowing budgets for 2010: 1. Revenue budget (in ) 2. Production budget (in units) 3. Direct materials usage budget (in units and ) 4. Direct materials purchases budget (in units and ) 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 statementLO1

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Ginger Ale Diet Ginger Ale Syrup 1,440 per lot 1,320 per lot Containers (bottles, caps, etc.) 1,200 per lot 1,200 per lot Packaging 960 per lot 960 per lot