Managerial Accounting (5th Edition)
Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
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Chapter 15, Problem 15.17AE

Sustainability and budgeting (Learning Objective 1)

Liller Beverages manufactures its own soda pop bottles. The bottles are made from polyethylene terephthalate (PET), a lightweight yet strong plastic. The company uses as much PET recycled resin pellets in its bottles as it can, both because using recycled PET helps the company to meet its sustainability goals and because recycled PET is less expensive than virgin PET.

Liller is continuing to search for ways to reduce its costs and its impact on the environment. PET plastic is melted and blown over soda bottle molds to produce the bottles. One idea Liller’s engineers have suggested is to retrofit the soda bottle molds and change the plastic formulation slightly so that 25% less PET plastic is used for each bottle. The average kilograms of PET per soda bottle before any redesign is 0.004 kg. The cost of retrofitting the soda bottle molds will result in a one-time charge of $35,947, while the plastic reformulation will cause the average cost per kilogram of PET plastic to change from $4.00 to $4.30.

Liller’s management is analyzing whether the change to the bottle molds to reduce PET plastic usage should be made. Management expects the following number of soda bottles to be used in the upcoming year:

Chapter 15, Problem 15.17AE, Sustainability and budgeting (Learning Objective 1) Liller Beverages manufactures its own soda pop

For the upcoming year, management expects the beginning inventory of PET to be 1,280 kilograms, while ending inventory is expected to be 1,690 kilograms. During the first three quarters of the year, management wants to keep the ending inventory of PET a1 the end of each quarter equal to 10% of the following quarter’s PET needs.

Requirements

  1. 1. Using the original data (before any redesign of soda bottles), prepare a direct materials budget to calculate the cost of PET purchases in each quarter for the upcoming year and for the year in total.
  2. 2. Assume that the company retrofits the soda bottle molds and changes the plastic formulation slightly so that less PET plastic is used in each bottle. Now prepare a direct materials budget to calculate the cost of PET purchases in each quarter for the upcoming year and for the year in total for this possible scenario.
  3. 3. Compare the cost of PET plastic for Requirement 1 (original data) and for Requirement 2 (making change to using less PET). What is the direct material cost savings from making the change to using less PET? Compare the total of those savings to the cost of retrofitting the soda bottle molds. Should the company make the change? Explain your rationale.
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Questions:- On March 1, 2019, Alpha Company's beginning work-in-process inventory had 8,000 units. This is its only production department. Beginning WIP units were 50% completed to conversion costs. Alpha introduces direct materials at the beginning of the production process. During March, a total of 15,000 units were started and a total of 20,000 units were completed. Alpha's ending WIP inventory had 3,000 units which were 70% completed to conversion costs. Alpha uses the weighted average method. Use this information to determine for March 2019 the equivalent units of production for conversion costs

Chapter 15 Solutions

Managerial Accounting (5th Edition)

Ch. 15 - Prob. 15.1SECh. 15 - Identify aspects within each G4 category on a GRI...Ch. 15 - Identify aspects within each G4 Social subcategory...Ch. 15 - Prob. 15.4SECh. 15 - Prob. 15.5SECh. 15 - Prob. 15.6SECh. 15 - Define key sustainability terms (Learning...Ch. 15 - Prob. 15.8SECh. 15 - Prob. 15.9AECh. 15 - Prob. 15.10AECh. 15 - Prob. 15.11AECh. 15 - Prob. 15.12AECh. 15 - Prob. 15.13AECh. 15 - Sustainability and cost behavior (Learning...Ch. 15 - Prob. 15.15AECh. 15 - Prob. 15.16AECh. 15 - Sustainability and budgeting (Learning Objective...Ch. 15 - Prob. 15.18AECh. 15 - Prob. 15.19AECh. 15 - Sustainability and capital investments (Learning...Ch. 15 - Sustainability and the statement of cash flows...Ch. 15 - Prob. 15.22AECh. 15 - Prob. 15.23BECh. 15 - Prob. 15.24BECh. 15 - Prob. 15.25BECh. 15 - Prob. 15.26BECh. 15 - Sustainability and process costing (Learning...Ch. 15 - Prob. 15.28BECh. 15 - Sustainability and CVP concepts (Learning...Ch. 15 - Prob. 15.30BECh. 15 - Prob. 15.31BECh. 15 - Prob. 15.32BECh. 15 - Prob. 15.33BECh. 15 - Sustainability and capital investments (Learning...Ch. 15 - Prob. 15.35BECh. 15 - Prob. 15.36BECh. 15 - Prob. 15.37APCh. 15 - Prob. 15.38APCh. 15 - Prob. 15.39BPCh. 15 - Prob. 15.40BPCh. 15 - Each year for the past six years, Caesars...Ch. 15 - Discussion Questions 1. Pressure to become more...Ch. 15 - Corporate Sustainability Reports Note: In the...Ch. 15 - Sustainability and investment choices...Ch. 15 - Ethics of internal sustainability reporting...Ch. 15 - FirstEnergy and its sustainability report...
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