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Yummi Lik makes really big lollipops in two sizes large and
Yummi-Lik makes really big lollipops in two sizes, large and giant. Yummi-Lik sells these
lollipops to convenience stores, fairs, schools for fundraisers, and in bulk on the Internet.
Summer is approaching and Yummi-Lik is preparing its budget for the month of June. The
lollipops are handmade, mostly out of sugar, and attached to wooden sticks. Expected sales are
based on past experience. This company uses pounds of material as its standard measure.
Yummi-Lik accounts for direct materials using a FIFO cost flow assumption.
Yummi-Lik uses a FIFO cost flow assumption for finished goods inventory. All the lollipops are
made in batches of ten. Yummi-Lik 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 low. Yummy-Lik uses activity-based costing and has
classified all overhead costs for the month of June as shown in the following chart:
REQUIRED
a. Revenue budget.
f. Budgeted unit cost of ending finished goods inventory and ending inventories budget.
2. Yummi-Lik’s balance sheet for May 31 follows. Use it and the following information to
prepare a cash budget for Yummi-Lik for June.
• 80% of sales are on account, of which half 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.
• All purchases of materials are on account. Yummi-Lik pays for 70% of purchases in the month
of purchase and 30% in the following month.
• Yummi-Lik is making monthly interest payments of 1% (12% per year) on a $20,000 long-term
loan.
• Yummi-Lik plans to pay the $500 of taxes owed as of May 31 in the month of June.
• 40% of processing and setup costs, and 30% of marketing and general administration costs
are amortization.
3. Prepare a budgeted income statement for June and a budgeted balance sheet for Yummi-Lik
as of June 30.
Yummi Lik makes really big lollipops in two sizes large and
ANSWER
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