Response to the following problem:
Oasis Bottling Company bottles popular beverages in the Bottling Department. The beverages are produced by blending concentrate with water and sugar. The concentrate is purchased from a concentrate producer. The concentrate producer sets higher prices for the more popular concentrate flavors. Below is a simplified Bottling Department cost of production report separating the costs of bottling the four flavors.
|
|
A
|
8
|
C
|
D
|
E
|
|
1
|
|
Orange
|
Cola
|
Lemon-Lime
|
Root Beer
|
|
2
|
Concentrate
|
$ 6,650
|
$135,000
|
S 99,000
|
$ 3,600
|
|
3
|
Water
|
2,100
|
36,000
|
27,000
|
1,200
|
|
4
|
Sugar
|
3,500
|
60,000
|
45,000
|
2,000
|
|
5
|
Bottles
|
7,700
|
132,000
|
99,000
|
4,400
|
|
6
|
Flavor changeover
|
3,500
|
6,000
|
4,500
|
5,000
|
|
7
|
Conversion cost
|
2,625
|
24,000
|
18,000
|
1,500
|
|
8
|
Total cost transferred to finished goods
|
$26,075
|
$393,000
|
$292,500
|
$17,700
|
|
9
|
Number of cases
|
3,500
|
60,000
|
45,000
|
2,000
|
Beginning and ending work in process inventories are negligible, so they are omitted from the cost of production report. The flavor changeover cost represents the cost of cleaning the bottling machines between production runs of different flavors.
Prepare a memo to the production manager analyzing this comparative cost information. In your memo, provide recommendations for further action, along with supporting schedules showing the total cost per case and the cost per case by cost element.