QUESTION $4[10]$

Milk Shake Limited is making a brand of healthy milk shake called $$Fruity Bomb$.$ The

Fruity Bomb is sold in two different sizes $$ a $500$ ml and a $1$litre container. The company

expects to sell $4000$ units of the smaller $500$ ml containers per year and $9000$ units of the

$1$ litre containers per year.

The Fruity Bomb is made in batches and then poured into the appropriately sized

container, i$.$e$.,$ either a $500$ ml container or a $1$ litre container. The Fruity Bomb is made in

batches of $100$ litres. The budgeted requirements for a batch of $100$ litres are shown

below.

Quantity and costs of a batch of $100$ litres of Fruity Bomb:

Cost category Ingredients Quantity Cost

per

unit

R

Batch

costs

R

Materials Milk $300$ litres $2600$

Fruit $25$kg $15375$

Labour $5$ hours $20100$

Variable overheads $5$ hours $20100$

$1175$

Inventory is valued on the basis of equivalent litres of inventory i$.$e$.,2$ x $500$ ml milk shake

drinks are valued the same as a $1$ litre container of Fruity Bomb. Variable overheads vary

with direct labour hours. Fixed overheads are allocated to products on the number of litres

of Fruity Bomb produced $($all Fruity Bomb drinks irrespective of the size of the output$).$

Details $500$ml $1$ litre

Selling price of the container R$1520$

Expected inventories $($units$)$

Opening inventory $50100$

Closing inventory $50200$

You are required to$,($as per the table provided$)$:

# Details Marks

$1.$ Prepare a sales budget for the entity both litres and rands $2$

$2.$ Prepare a production budget for the year $3$

$3.$ Prepare a materials purchase budget for milk and fruit in both rands

and units. $($Hint: calculate the equivalent annual output of the two

variants in litres first, rather than in $500$ml and $1$litre$)$

$5$

Total marks $10$