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Direct Materials Purchases Budget Soda is the largest bottler of Soda in Western Europe. The company purchases Brand 1 and Brand 2 concentrate from The
Direct Materials Purchases Budget Soda is the largest bottler of Soda 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 is as follows for the month of May: Brand 1 139,000 two-liter bottles - Brand 2 106,000 two-liter bottles In addition, assume that the concentrate costs $84 per pound 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 $0.086 per bottle and carbonated water costs $0.066 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. Soda-Wakefield Plant Direct Materials Purchases Budget For the Month Ending May 31 (assumed data) Concentrate 2-Liter Bottles Carbonated Water Materials required for production: Brand 1 278 lbs. 139,000 btls. 278,000 ltrs. Brand 2 212 X 106,000 212,000 Total materials 490 X lbs. 245,000 btls. 490,000 ltrs. Direct materials unit price x $ 84 x $ 0.086 0.066 Total direct materials to be purchased 41,160 x $ 21,070 $ 32,340
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