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: Brand 1 145,000 two-liter bottles Brand 2 110,000 two-liter bottles In addition, assume that the concentrate costs $63 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 $0.075 per bottle and carbonated water costs $0.055 per liter. Prepare a direct materials purchases budget for March 2016, 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).

Soda Company-Wakefield Plant

Direct Materials Purchases Budget

For the Month Ending March 31, 2016 (assumed data

Explanation / Answer

10875

(145,000*0.075)

8250

(110000*0.075

Total material brand 1. Brand 2

Purchase cost. 45095. 41140

Brand 1 brand 2 Manufacturing quantity (no of bottles) 145000 110000 Total liters of quantity manufactured (*2) 290000 220000 No of pounds of concentrate required 290 330 Working above (290000*.1/100) (220000*.15/100) Cost to purchase concentrate 18270(290*63) 20790 (330*63) Two liter bottle purchase cost

10875

(145,000*0.075)

8250

(110000*0.075

Carbonated water cost 15950 (290000*0.055) 12100 (220000*0.055)

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