Question
Nupes is a famous stick-candy maker in Sydney and produces stick-candies in two sizes, i.e., regular and large. The company sells their products on several
Nupes is a famous stick-candy maker in Sydney and produces stick-candies in two sizes, i.e., regular and large. The company sells their 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
| Regular | Large |
Direct materials: |
|
|
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 goods2
| 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 | 230 | 160 |
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 | $2.1 per DMLH | ||
|
|
| (DMLH) |
|
Non-manufacturing: |
|
| ||
Marketing & general admin | Sales revenue | 12% |
Required:
(a) Revenue (or sales) budget |
| (2 marks) |
(b) Production budget in units |
| (6 marks) |
(c) Direct materials usage budget and direct materials purchases budget (10 marks)
(d) Direct manufacturing labour cost budget (6 marks)
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