Case study Reappearance, follo

Case study

Reappearance, followed by glowing and floating . . .

The directors of Machiq Limited (see previous case studies) staged a miraculous reappearance after vanishing at a product test organised by their arch business rival, Esmeralda (a.k.a. Mrs Eadale). Antidote had been sprayed liberally around the company’s headquarters, and this had had the desired effect of neutralising the vanishing potion. Esmeralda also returned and, as an act of repentance, decided immediately to give up the business world and devote herself to charitable work. Realising that the business had (almost literally) been left floating in thin air, the three directors, Marvin, Chiquita and Trixie, decided to plan ahead. In particular, they wanted to consider reopening a manufacturing division to make two products: Glow Gel and Floating Juice, both to be sold in 1 kg tubs. They decided to produce a budget for the year ending 30 June 2017 relating to these two products. The following information is available:

● Both products use the same raw materials, Luminos and Schlepp. One kilo of Glow Gel uses 6 litres of Luminos and 8 litres of Schlepp. One kilo of Floating Juice uses 10 litres of Luminos and 4 litres of Schlepp.

● Forecast sales are 16,000 kg of Glow Gel and 12,000 kg of Floating Juice.

● The company plans to hold inventories of 1,200 kg of Glow Gel and 800 kg of Floating Juice on 30 June 2017, and at the same date forecasts inventories of raw materials as 15,200 litres of Luminos and 9,200 litres of Schlepp.

● Due to environmental factors beyond the company’s control, it is forecast that there will be losses of items in store as follows:

Glow Gel                             100 kg

Floating Juice                     200 kg

Luminos                               1,000 litres

Schlepp                                400 litres

● The cost price of one litre of Luminos is £4, and one litre of Schlepp costs £2.50.

Required

Prepare a materials purchase budget for the two products for the year to 30 June 2017.

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