Section A Master Budget Problem Carnegie is a famous stick-candy maker in Canberra 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 Carnegie is preparing its budget for December. All Carnegie's 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 m direct manufacturing labour hour gleLH} Input Quantities unit of output Regular Large Direct materials: Sugar 0.25 kg 0.50 kg Sticks 1 1 Direct manufacttuing labour hour (DMLH) 0.22 hour 0.31 hour Set-up hours per batch 0.11 hour 0.13 hour Invento_r1 data for direct materials' Sugar Sticks Beginning inventory 150 kg 415 Target ending inventory 275 kg 515 Cost of beginning inventory $65 $107 Carnegie 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 2 Carnegie uses a FIFO cost flow assumption for finished goods inventory. All the stick-candies are made in batches of 10. Carnegie 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. Carnegie 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 1. For December 2020, prepare the following: (a) Revenue (or sales) budget (2 marks) (b) Production budget in units (4 marks) (c) Direct materials usage budget and direct materials purchases budget (7 marks) (d) Direct manufacturing labour cost budget (4 marks) (e) Manufacturing overhead cost budgets for processing and set-up activities (2 marks) (f) Budgeted unit cost of ending finished goods inventory and ending inventories budget (9 marks) (g) Cost of goods sold budget (4 marks) (h) Marketing and general administration costs budget (2 marks) 2. Carnegie's balance sheet for 30 November 2020 follows. Use it and the following information to prepare a cash budget for Carnegie for December 2020: (5 marks)0 75% of Carnegie's sales are on credit sales (sales on account). Out of these credit sales, 50% are collected in the month of the sale, 49% are collected the following month and 1% are never collected and written off as bad debts. o All purchases of materials are on account. Carnegie pays for 75% of purchases in the month of purchase and 25% in the following month. 0 All other costs are paid by Carnegie in the month incurred. 0 Carnegie is making monthly interest payments of 1% (12% per year) on a $20,000 long-term loan. 0 Carnegie plans to pay the $500 of taxes owed as of 30 November 2020 in December 2020. Income tax expense for December is zero. 0 35% of marketing and general administration costs are depreciation, and 45% of processing and set-up costs are also depreciation. Carnegie Balance Sheet as of 30 November 2020 Assets Cash $2,000 Account receivable $4,800 Less: Allowance for bad debts 96 4,704 Inventories: Direct materials 11'2 Finished goods 990 Fixed assets $190,000 Less: Accumulated depreciation 55,759 134,241 Total assets M Liabilities and equity Account payable $696 Taxes payable 500 Interest payable 200 Long-term debt 20,000 Ordinaly shares 10,000 Retained earnings 110,711 Total liabilities and Quit! mg; I Q; 3. Prepare a budgeted income statement for December 2020 and a budgeted balance sheet for Carnegie as of 31 December 2020. ****End of Section A**** (6 marks)