Question

Direct Materials Purchases Budget

Soda Company is the largest bottler 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 are as follows for the month of May:

Brand 1	107,000 two-liter bottles
Brand 2	81,000 two-liter bottles

In addition, assume that the concentrate costs $63 per pound for both Brand 1 and Brand 2 and is used at a rate of 0.15 pound per 100 liters of carbonated water in blending Brand 1 and 0.2 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 $0.071 per bottle and carbonated water costs $0.051 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. If required, round to the nearest whole number (except for unit price amounts, which should be rounded to nearest cent if required).

Soda Company-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	lbs.	btls.	ltrs.
Brand 2
Total materials required	lbs.	btls.	ltrs.
Unit price	x $	x $	x $
Total direct materials to be purchased	$	$	$

Answer 1

Solution Required : Direct materials purchases budget for May Soda Company-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 Brand 2 Total materials required Unit price Total direct materials to be purchased 321 lbs. 324 lbs. 645 lbs. $63 $40,635 107,000 btls. 81,000 btls. 188,000 btls. $0.071 $13,348 214,000 ltrs. 162,000 ltrs 376,000 Itrs. $0.051 $19,176 I Brand 1 L Brand 2 Estimated production in no. of two-liter bottles 107,000 81,000 Carbonated water required for each two-liter bottle Total Itrs. of Carbonated water required for production 2 Itrs. 214,000 Itrs. 2 Itrs. 162,000 ltrs. 0.15 lbs. 0.2 lbs. Pounds of concentrate required for each 100 ltrs. of carbonated water Total Pounds of concentrate required for production Brand 1 (0.15 lbs. x 214,000 ltrs. / 100 Itrs.) Brand 2 (0.20 lbs. x 162,000 ltrs. / 100 ltrs.) 321 lbs. 324 lbs.