• This assignment has two equally weighted parts:
o Part 1 – Technical
o Part 2 – Essay ( 1500 – 1800 word)

• The assessment criteria are on p. 4.
Please note: your work must comply with the University’s General Guide for the Presentation of Academic Work. http://www.ballarat.edu.au/current-students/publications,-policies-and-forms/general-guide-for-the-presentation-of-academic-work
This is a group-assignment. Each group needs to have 2 to 3 members in it. Please organise yourselves into groups. Please make sure that names and ID numbers of all members are stated on the cover sheet of your submission.

As this is a group assignment, each member of a group is awarded the same mark. Working in groups has its pros and cons. I am sure that you will hold constructive and energetic group discussions on the issues at hand. In case of any disagreements, you will be able to resolve them in a democratic and rational way. There will be times when you may have to agree to disagree with each other. Invariably different group members bring different skills to a project; it is up to you to make the best of it. I believe one can learn a lot by discussing the issues with one’s colleagues.

If you happen to find your group members are “not pulling their weight” or there are problems with any member’s commitment, then please try to resolve those issues amongst yourselves. Open and honest communication always helps. If you are unable to resolve these issues, you are most welcome to see me and we will try to sort out the problems together. Do this as soon as possible and certainly before the due date.



PART 1

Yummy-Pop Ltd makes lollipops in two sizes, large and giant. The company sells these lollipops to convenience stores, fairs, schools for fundraisers, and in bulk on the Internet.

Summer is approaching and Yummy-Pop is preparing its budget for the month of December 2013. The lollipops are hand-made, mostly out of sugar and attached to wooden sticks. Expected sales are based on past experience.

Other information for the month of December follows:

Input prices
Direct materials
Sugar $0.50 per kilogram (kg)
Sticks $0.30 each
Direct manufacturing labour $8 per direct manufacturing labour-hour

Input quantities per unit of output
Direct materials Large Giant
Sugar 0.25 kg 0.5 kg
Sticks 1 1
Direct manufacturing labour-hours (DMLH) 0.2 hour 0.25 hour
Set-up hours per batch 0.08 hour 0.09 hour

Inventory information, direct materials
Sugar Sticks
Beginning inventory 125 kg 350
Target ending inventory 240 kg 480
Cost of beginning inventory $64 $105


Yummy-Pop accounts for direct materials using a FIFO cost flow assumption.

Sales and inventory information, finished goods

Large Giant
Expected sales in units 3000 1800
Selling price $3 $4
Target ending inventory in units 300 180
Beginning inventory in units 200 150
Beginning inventory in dollars $500 $474

Yummy-Pop uses a FIFO cost flow assumption for finished goods inventory.






All the lollipops are made in batches of 10. Yummy-Pop incurs manufacturing overhead costs, and marketing and general administration costs, but customers pay for shipping. Other than manufacturing labour costs, monthly processing costs are very small.

Yummy-Pop uses activity-based costing and has classified all overhead costs for the month of December as shown in the following chart:

Cost type Denominator activity Rate
Manufacturing:
Set-up Set-up hours $20 per set-up hr
Processing Direct manufacturing labour-hours (DMLH) $1.70 per DMLH
Non-manufacturing:
Marketing and general administration Sales revenue 10%


Required:
Prepare each of the following for December 2013:
a. Revenues budget
b. Production budget in units
c. Direct material usage budget and direct material purchases budget
d. Direct manufacturing labour cost budget
e. Manufacturing overhead cost budgets for processing and set-up activities
f. Budgeted unit cost of ending finished goods inventory and ending inventories budget
g. Budgeted income statement.


PART 2

Go to: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=321520
http://www.bbrt.org/beyond-budgeting/bb-problem.html

“Budgeting Gamesmanship” – posted on your site.
“Why Incentive Plans Cannot Work”—posted on your site.

Critically review the above. Do you agree, partly agree or disagree with the issues raised in the above? Discuss your reason (s) for doing so. You need to support your viewpoint with carefully chosen and authoritative evidence.