Comprehensive Master Budget:

ABC Costing, Operating & Financial Budgets

Nupes is a famous stick-candy maker in Sydney and produces stick-candies in two sizes, i.e., regular and large. The company sells its products on several platforms such as stores, fairs, schools for fundraisers and in bulk on the internet. 2020 summer is approaching, and Nupes is preparing its budget for December. All Nupess stick candies are hand-made, mostly out of sugar, and attached to sticks. Expected sales are based on past experience.

Other information for December 2020 is as follows:

Input prices

Direct materials: Sugar $0.45 per kg

Sticks $0.55 each

Direct manufacturing labour $9 per direct manufacturing labour hour (DMLH)

Input quantities per unit of output

Direct materials: Regular Large

Sugar 0.25 kg 0.50 kg

Sticks 1 1

Direct manufacturing labour hour (DMLH) 0.22 hour 0.31 hour

Set-up hours per batch 0.11-hour 0.13 hour

Inventory data for direct materials1

Sugar Sticks

Beginning inventory 150 kg 415

Target ending inventory 275 kg 515

Cost of beginning inventory $65 $107

Nupes accounts for direct materials using a FIFO cost flow assumption.

Sales and inventory data for finished goods

Regular Large

Expected sales in units 3,500 2,300

Selling price $5.5 $6.5

Target ending inventory in units 350 190

Beginning inventory in units 235 165

Beginning inventory in dollars $510 $480

Nupes uses a FIFO cost flow assumption for finished goods inventory.

All the stick-candies are made in batches of 10. Nupes incurs manufacturing overhead cost, and marketing and general administration costs, but customers pay for shipping. Other than manufacturing labour costs, monthly processing costs are very small. Nupes uses activity-based costing (ABC) and has classified all overhead costs for December 2020 as follows

Cost type Denominator activity Rate

Manufacturing:

Set-up Set-up hours $24 per set-up hour

Processing Direct manufacturing labour hour (DMLH) $2.1 per DMLH

Non-manufacturing:

Marketing & general admin Sales revenue 12%

Required Q1. For December 2020, prepare the following:

(a) Revenue (or sales) budget

(b) Production budget in units

(c) Direct materials usage budget and direct materials purchase budget

(d) Direct manufacturing labour cost budget

(e) Manufacturing overhead cost budgets for processing and set-up activities

(f) The budgeted unit cost of ending finished goods inventory and ending inventories budget

(g) Cost of goods sold budget.

(h) Marketing and general administration cost budget.