1. ENERGY DRINK DIVISION (EDD)

EDD manufactures two citrus-flavoured energy drink products namely, Bolt which contains sugar, and Nerd, which is sugar-free. Different to its competitors, Bolt is sold in a can containing 250 millilitres (ml) while a Nerd can contain 500 ml of energy drink. EDD values all types of inventories using the first-infirst-out costing method.

1.1 Budgeted information for the financial year ending 31 December 2022

The company was hacked for ransom towards the end of the year resulting in some customer information leaking. This was primarily due to their outdated firewall systems. The EDD resolved to restore backup data, however, due to the old backup systems, there was a loss of some backup data which included extracts of the budgetary information.

You have been provided with the following information from the extracts the management accountant could find from the backups, with additional information supplemented through divisional meeting minutes:

1.1.1. EDDs maximum manufacturing capacity is based on the availability of the prepared water.

EDD buys the prepared water exclusively from Quench (Pty) Ltd (Quench) at R2,00 per litre. A maximum of 5 million litres of prepared water will be made available by Quench. Each litre of energy drink requires 900 ml of water.

1.1.2. The company budgeted to produce 15 million cans and sell 12 million cans. Both production and sales will be at a rate of two cans of Bolt for every one can of Nerd.

1.1.3. Bolt is sold at R17 per can and Nerd at R24 per can, which is considered to be above competitor prices.

1.1.4. EDD budgeted to have no opening inventory of any kind.

1.1.5. Sugar was budgeted at R25 per kilogram (kg) and 0,16 kg is used for one litre of manufactured

Bolt.

1.1.6. Artificial sweetener was budgeted R162 per kg and 0,11 kg is used for one litre of manufactured Nerd.

1.1.7. Both Bolt and Nerd contain caffeine. Caffeine was budgeted at R169 per 100 gram (g), and 80 milligram (mg) is required per 250 ml manufactured. (1 000 mg equals one gram)

1.1.8. Taurine is budgeted at R175 per 100 g and 1 000 mg is required per 250 ml for both Bolt and Nerd.

1.1.9. Both products contain Citrus flavouring at 0,2 ml per litre manufactured. Citrus flavouring was budgeted at R40 per 20 ml.

1.1.10. Direct labour costs are R30 per direct labour clock hour. 10% idle time is allowed for both products, and it takes 10 direct labour clock minutes to manufacture one litre of Bolt and 8 direct labour clock minutes to manufacture one litre of Nerd. EDD has recently come under scrutiny and was criticised for not employing locals and that they prefer to employ mostly male employees in management positions as they believe that this provides stability to management.

1.1.11. Variable manufacturing overhead (VMO) costs are allocated based on machine time used in the manufacturing of each product. The variable manufacturing overhead recovery rate per machine hour is R12 per hour and it takes 12 machine minutes to manufacture one litre of energy drink. Machine capacity is budgeted at 1 000 000 hours.

1.1.12. The fixed manufacturing overhead (FMO) cost is budgeted at R35 million and is allocated to products based on the budgeted machine hours. The recovery rate per machine hour is the same for both products. It is the accounting policy of BevSoft to treat the related under-(over) recovery as a period cost.

1.1.13. Other budgeted fixed costs are R50 million.

1.1.14. Variable selling and distribution costs are budgeted at R1,10 per unit sold.

Required

1 calculate EED'S budgeted break-even sales units per product type for the 2022 financial year?