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 May: Brand 1 33,000 two-liter bottles Brand 2 25,000 two-liter bottles In addition, assume that the concentrate costs $64 per pound for both Brand 1 and Brand 2 and is used at a rate of 0.2 pound per 100 liters of carbonated water in blending Brand 1 and 0.25 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 $0.082 per bottle and carbonated water costs $0.062 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. If required, round to the nearest whole number (except for unit price amounts, which should be rounded to nearest cent if required).

Answer 1

Soda-Wakefield plant

Direct material purchase budget

For the month ending May 31 (assumed data)

	Concentrate	2- litter bottles	Carbonated water
Materials required for production
Brand 1	132 lbs [(33000*2/100)*0.2]	33000 btls	66000 ltrs (33000*2)
Brand 2	125 lbs [(25000*2/100)*0.25]	25000 btls	50000 ltrs (25000*2)
Total materials	257 lbs	58000 btls	116000 ltrs
Direct material per unit price	$64	$0.082	$0.062
Total direct material to be purchased	$16448	$4756	$7192