Direct Materials Purchases Budget Soda Company is the largest bottler in Western

Question

Direct Materials Purchases Budget

Soda Company is the largest bottler 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 are as follows for the month of March:

In addition, assume that the concentrate costs $60 per pound for 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 March 2014, assuming inventories are ignored, because there are no changes between beginning and ending inventories for concentrate, bottles, and carbonated water. If required, round to the nearest whole number (except for unit price amounts, which should be rounded to nearest cent if required).

Explanation / Answer

Material Required for Production Concentrate 2 litre bottles Carbonated water Brand 1 236 118000 236000 Brand 2 270 90000 180000 Total materials 506 208000 416000 Direct Materials Unit Price               60.00                    0.08                             0.06 Total Direct Materials to be purchased       30,360.00         16,640.00                   24,960.00

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