Question

Soda is the largest bottler of Soda in Western Europe. The company purchases Brand 1 and Brand 2 concentrate from The Soda Company, dilutes and mixes the concentrate with carbonated water, and then fills the blended beverage into cans or plastic two-liter bottles. Assume that the estimated production for Brand 1 and Brand 2 two-liter bottles at the Wakefield, UK, bottling plant is as follows for the month of May:col1 Brand 1 106,000 two-liter bottlescol2 Brand 2 81,000 two-liter bottlesIn addition, assume that the concentrate costs $79 per pound both Brand 1 and Brand 2 and is used at a rate of 0.1 pound per 100 liters of carbonated water in blending Brand 1 and 0.15 pound per 100 liters of carbonated water in blending Brand 2. Assume that two liters of carbonated water are used for each two-liter bottle of finished product. Assume further that two-liter bottles cost $0.08 per bottle and carbonated water costs $0.06 per liter.Prepare a direct materials purchases budget for May, assuming inventories are ignored, because there are no changes between beginning and ending inventories for concentrate, bottles, and carbonated water.

Answer 1

Answer and explanation:

check the attached file for a well formatted answer

The purchase budget for the month of Mar 2012 is asked. Also there are no changes in beginning and closing inventories. The data given is summarised as below,

Brand 1 Brand 2

Bottle size 2 lit 2 lit

Number of bottles 106000 81000

Concentrate cost $85 per pound

Concentrate used 0.15 lb per 100 lit 0.2 lb per 100 lit

Carbonated water used 2 lit 2 lit

Bottle cost $0.1 per bottle

Carbonated water cost $0.08 per litre

Based on this the budget is filled as below,

CONCENTRATE 2-LITRE BOTTLES CARBONATED WATER

Brand 1 (A)

318 lbs

[=106000*2/100*0.15 lbs]

106000 bottles

212000 litres

[106000 bottles * 2 litres]

Brand 2 (B)

324 lbs

[=81000*2/100*0.2 lbs]

81000 bottles

162000

[81000 bottles * 2 litres]

Total Materials (C=A+B) 642 lbs 187000 bottles 374000 litres

Direct materials unit price (D) $ 85 $ 0.1 $ 0.08

Total direct materials to be purchased (E=C*D) $54570 $18700 $29920