Devon Beverages manufactures its own soda pop bottles. The bottles are made from polyethylene terephthalate (PET), a lightweight yot strong plastic. Devon uses as much PET recycled resin pellets in its bottles as it Devon's management is analyzing whether the change to the bottle can, both because using recycled PET helps Devon to meet its molds to reduce PET plastic usage should be made. Management expects the following number of soda bottles to be used in the sustainabilty goals and because recycled PET is less expensive than vigin upcoming year PET (Clack the icon to view the number of soda botles) (Click the icon to view more information) Road the cequitements. More info Devon is continuing to sarch for ways to reduce its costs and its impact on the environment. PET plastic is melted and blown over soda bottle molds to produce the bottles. One idea Devon's engineers have suggested is to retrofit the soda bottle molds and change the plastic formulation slightly so that 25% less PET plastic is used for each bottle. The average kilograms of PET per soda bottle before any redesign is 0.004kg. The cost of retrofitting the soda bottle molds will result in a one-time charge of $35,894, while the plastic reformulation will cause the average cost per kilogram of PET plastic to change from $4.00 to $4.30. Data table For the upcoming year, management expects the beginning inventory of PET to be 2,760 kilograms, while ending inventory is expected to be 3,880 kilograms. During the first three quarters of the year, management wants to keep the ending inventory of PET at the end of each quarter equal to 30% of the following quarter's PET needs. Requirements 1. Using the original data (before any redesign of soda bottles), prepare a direct materials budget to calculate the cost of PET purchases in each quarter for the upcoming year and for the year in total. 2. Assume that the company retrofits the soda bottle molds and changes the plastic formulation slightly so that less PET plastic is used in each bottle. Now prepare a direct materials budget to calculate the cost of PET purchases in each quarter for the upcoming year and for the year in total for this possible scenario. 3. Compare the cost of PET plastic for Requirement 1 (original data) and for Requirement 2 (making change to using less PET.) What is the direct material cost savings from making the change to using less PET? Compare the total of those savings to the cost of retrofitting the soda bottle molds. Should the Requirement 1. Using the original data (before any redesign of soda botlles), prepare a direct matenials budget to calculate the cost of PET purchases in each quarter for the upcoming year and for the year in total Start by preparing the direct materials budget through the total quantity needed, then complete the budget. * HAnnun, expribnh in, Requirement 2. Assume that the company retrofits the soda bottie molds and changes the plastic formulation slightly so that less PET plistic is used in each bottle. Now prepare a direct materials budget to calculate the cost of PET purchases in each quarter for the upcoming year and for the year in total for this possible scenario Start by preparing the direct materials budget through the total quantity needed then complete the budget Units to be produced Multiply by Quantity of direct materials needed per unit Quantity of PET needed for production Plus Desired ending inventory Total quantity needed Less Beginning inventory of direct materials Quantity to purchase Multiply by Cost per kilogram Total cost of direct material purchases Requirement 3. Compare the cost of PET plastic for Requirement 1 (original data) and for Requirement 2 (making change to using less PET) What is the direct material cost savings from making the change to using less PET? Compare the total of those savings to the cost of retrofiting the soda bottle molds. Should the company make the change? Explain your rationale Begin by computing the direct material cost savings from making the change to using less PET? Compare the total of those savings to the cost of retrofitting the soda bottle molds for the first year. Should the company make the change? Explain your rationale. A. The company should make the change (retrofiting). Reviewing the comparison of the total savings to the cost of retrofiting shows that ther should retrofit. There is net savinas in the first vear and after the first vear the annual savinas are sianificant. Compare the fotal of those savings to the cost of retrofitting the soda bottle molds for the first year. Should the company make the change? Explain your rationale. A. The company should make the change (retroftting). Revewing the comparison of the total savings to the cost of retrofiting shows that they should retroft. There is net savings in the first year and after the first year the annual savings are significant B. The company should not make the change (retroftting). Reviewing the comparison of the total savings to the cost of retrofiting shows that they should not retrofit. There is a net cost the first year, therefore, they will never recoup the cost of retrofiting c. The company should make the change (retrofiting). Reviewing the comparison of the total savings fo the cost of retrofiting shows that they should retrofit as the not savings is more than twice the cost of retrofiting the molds. D. The company should not make the change (rotrotiting). Reviewing the comparison of the total sivings to the cost of retrofiting makes it appear that they should not retroft However, after the first year the annual savings are significant