Question
A local beverage company bottles two soft drinks under a licence from an international brand. Bottling at this factory is a highly repetitive and automated
A local beverage company bottles two soft drinks under a licence from an international brand. Bottling at this factory is a highly repetitive and automated process. Empty bottles are removed from their packaging, placed on a conveyor, and cleaned, rinsed, dried, filled and capped and heated. There is no work in process, the only inventory being either direct material or finished goods. The two soft drinks bottled are called Regular and Light. The syrup from both drinks is purchased from the brand owner. Syrup for the Regular contains more sugar than the syrup for the Light. The company uses a lot size of 1000 cases as the unit of analysis in its budgeting (each case contains 24 bottles). Direct materials are expressed in terms of lots, where one lot of direct materials is the input necessary to yield one lot (1000 cases) of beverage. In 2020, the following purchase prices are forecasted for direct materials:
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