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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

  1. 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

  1. 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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