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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Direct materials purchases budget

Coca-Cola Enterprises is the largest bottler of Coca-Cola® in Western Europe. The company purchases Coke and Sprite® concentrate from The Coca-Cola 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 Coke and Sprite two-liter bottles at the Wakefield, UK, bottling plant is as follows for the month of May:

Coke 153,000 two-liter bottles
Sprite 86,500 two-liter bottles

In addition, assume that the concentrate costs $75 per pound for both Coke and Sprite and is used at a rate of 0.15 pound per 100 liters of carbonated water in blending Coke and 0.10 pound per 100 liters of carbonated water in blending Sprite. 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 that inventories are ignored, because there are no changes between (beginning and ending inventories for concentrate, bottles, and carbonated water.

To determine

Budgeting is a process to prepare the financial statement by the manager to estimate the organization’s future actions. It is also helpful to satisfy the everyday activities.

Production Budget shows the quantities of units that a company must produce to meet the budgeted sales and inventory.

To Prepare: The September’s direct materials purchases budget for Incorporation L.

Explanation

The following table shows theSeptember’s direct materials purchases budget.

Enterprises C
Direct Materials Purchases Budget
For The Month Ending May 31
Particulars Concentrate 2-Liter Bottles Carbonated Water (Liters)
(A) 2 × (A)
Materials Required For Production
Koke 459(1) 153,000 306,000 
Spride  173(2) 86,500 173,000
Total Materials Required(B) 632 239,500 479,000
Unit Price(C) $75 $0.08 $0.06
Total (B) × (C) $47,400 $19,160 $28,740
Total Direct Materials To Be Purchased $95,300

Table (1)

Working Notes:

Calculate the direct material for Koke...

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