Need help on all requirements please!
Derry Beverages manufactures its own juice bottles. The bottles are made from polyethylene terephthalate (PET), a lightweight yet strong plastic. Derry uses as much PET recycled resin pellets in its bottles as it can, both because using recycled PET helps Derry to meet its sustainability goals and because recycled PET is less expensive than virgin PET. (Click the icon to view more information.) Derry's management is analyzing whether the change to the bottle molds to reduce PET plastic usage should be made. Management expects the following number of juice bottles to be used in the upcoming year: : (Click the icon to view the number of soda bottles.) Read the requirements 1 Requirements 1. Using the original data (before any redesign of juice 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 juice 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 juice bottle molds. Should the company make the change? Explain your rationale. X More Info Derry is continuing to search for ways to reduce its costs and its impact on the environment. PET plastic is melted and blown over juice bottle molds to produce the bottles. One idea Derry's engineers have suggested is to retrofit the juice bottle molds and change the plastic formulation slightly so that 15% less PET plastic is used for each bottle. The average kilograms of PET per juice bottle before any redesign is 0.02 kg. The cost of retrofitting the juice bottle molds will result in a one-time charge of $85,176, while the plastic reformulation will cause the average cost per kilogram of PET plastic to change from $4.00 to $4.20. Data Table - X Quarter 1 Quarter 2 Quarter 3 Quarter 4 Number of juice bottles to be produced ...... 2,500,000 2,300,000 2,000,000 3,000,000 For the upcoming year, management expects the beginning inventory of PET to be 10.000 kilograms, while ending inventory is expected to be 12,520 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 20% of the following quarter's PET needs. Requirement 1. Using the original data (before any redesign of juice 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. Start by preparing the direct materials budget through the total quantity needed, then complete the budget. Quarter 3 Quarter 4 Year Derry Beverages Direct Materials Budget For quarters 1 through 4 Quarter 1 Quarter 2 Units to be produced 2,500,000 2,300,000 Multiply by: Quantity of direct materials needed per unit 0.02 0.02 Quantity of PET needed for production 50,000 46,000 Plus: Desired ending inventory Total quantity needed 2,000,000 3,000,000 0.02 0.02 9,800,000 0.02 40,000 60,000 196,000
