Question

In order to maintain a modicum of ties to Canada Justin Bieber developed a product called “Blend it like Bieber” a maple and honey blend designed to compete with table syrups, honey, and other honey-like natural sweeteners.

The honey is sourced from a private Bee Farm on the outskirts of Medicine Hat, Alberta from 4th generation bee farmers. The maple syrup comes from a maple syrup production plant in Val-d’Or in the province of Quebec.

Last year was the first year for Blend it like Bieber and had sales of $5,799,000. BILB only sells wholesale and only has two sizes. A price of $3.25 for their 150mL bottle and $6.75 for their 475mL bottle. Sales were nearly even with the 475 mL bottle selling 812,700 units only 3,000 more units than the small bottle. A price change is planned and it is estimated that unit sales will rise.

A. Create a sales budget with the projected units and sales prices for next year.

Use your projected unit sales to create a production budget to answer the question below.

Beginning Inventory Ending Inventory

150mL bottle 120,400 units ???,??? units

475mL bottle 89,200 units ???,??? units

Blend it like Bieber Inc. wants ending inventory to be 25% of sales for the smaller bottles and 15% for the larger bottles

B. Create a production budget for both size bottles based on all the above information.

The “blend” can be broken down into three parts:

Maple: 40%, Honey 10%, Other Additives 50%.

The cost for the parts is as follows

Maple Syrup = $10 / liter

Honey = $17 / liter

Additives = $4 / liter

Liter = 1000 mL

C. Create a Direct Materials Purchases Budget for both size bottles based on all the above information.

D. What is the projected Gross Margin (Sales – COGS) for next year?

Answer 1

A. Sales budget for the next year
Product	Blend it like Bieber
Size of unit	150ml	475ml	Total
a. Sales (units)	809,700	812,700
b. selling price per unit $	3.25	6.75
c.Sales $	2,631,525	5,485,725	8,117,250
B.Prduction Budget for the next year
	150ml	475ml
a. Sales Units (projected)	809,700	812,700
b. Planned ending inventory	202,425	121905
c. Planned production (a+b)	1,012,125	934,605
d. Beginning inventory	120,400	89,200
e. Production (units) (c-d)	891,725	845,405
C.Direct Materils cost Budget
a.Production (units)	891,725	845,405
b.Size of unit	150ml	475ml
c. Production (no.of lters)	133,759	401,567	535,326
d. Parts	Liters	Cost/liter	Amount $
i. Maple (40%)	214,130	$10	2,141,300
ii. Honey (10%)	53,533	$17	910,061
iii.Other Additives (50%)	267,663	$4	1,070,652
Total	535,326		4,122,013
D.Projected Gross Margin
a. Sales               $	8,117,250
b. COGS             $	4,122,013
c. Gross margin $	3,995,237
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