Soda is the largest bottler of Soda in Western Europe. The company purchases Brand 1 and Brand 2 concentrate from The Soda Compa
ny, 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:col1 Brand 1 106,000 two-liter bottlescol2 Brand 2 81,000 two-liter bottlesIn addition, assume that the concentrate costs $79 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 $0.08 per bottle and carbonated water costs $0.06 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.
1 answer:
Answer and explanation:
<em>check the attached file for a well formatted answer</em>
The purchase budget for the month of Mar 2012 is asked. Also there are no changes in beginning and closing inventories. The data given is summarised as below,
Brand 1 Brand 2
Bottle size 2 lit 2 lit
Number of bottles 106000 81000
Concentrate cost $85 per pound
Concentrate used 0.15 lb per 100 lit 0.2 lb per 100 lit
Carbonated water used 2 lit 2 lit
Bottle cost $0.1 per bottle
Carbonated water cost $0.08 per litre
Based on this the budget is filled as below,
CONCENTRATE 2-LITRE BOTTLES CARBONATED WATER
Brand 1 (A)
318 lbs
[=106000*2/100*0.15 lbs]
106000 bottles
212000 litres
[106000 bottles * 2 litres]
Brand 2 (B)
324 lbs
[=81000*2/100*0.2 lbs]
81000 bottles
162000
[81000 bottles * 2 litres]
Total Materials (C=A+B) 642 lbs 187000 bottles 374000 litres
Direct materials unit price (D) $ 85 $ 0.1 $ 0.08
Total direct materials to be purchased (E=C*D) $54570 $18700 $29920
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(a) The two types of shock which are:
- Primarily the growth in oil values is a negative supply shock causing from a decline in supply of oil
- The reduction in oil charges is a Positive supply shock causing from a growth in supply of oil.
(b) If the charges of oil increases as in case (i) that will push companies’ prices and thus decrease SRAS. The new equilibrium will be established at a inferior level of output and higher charge level. This is reflected in the diagram attached.
In the case (ii), the opposed of this will occur. The SRAS will rise shifting the SRAS rightward and carry about a new equilibrium at upper level of output and lesser prices.
