MAC3701 Assignment 2 Semester 1 2023 QUESTION 1 (100 Marks) BevSoft Drinks Ltd (“BevSoft”), situated near Springs in the Gauteng Province, is one of the leading energy drink and effervescent tablet manufacturers in the East rand operating in a fiercely competitive market. The company operates two divisions namely the Energy drink division (EDD) and the Effervescent tablet division (ETD). BevSoft’s head office allocates corporate head office expenses at its discretion. All other decisions are made by the respective divisional managers. BevSoft has a 31 December financial year end and makes use of the absorption costing system. BevSoft management strives to ensure that all ingredients and manufacturing processes comply with food regulatory requirements. The company’s budgeted required rate of return is 9% per annum. 1. ENERGY DRINK DIVISION (EDD) EDD manufactures two citrus-flavoured energy drink products namely, Bolt which contains sugar, and Nerd, which is sugar-free. Different to its competitors, Bolt is sold in a can containing 250 millilitres (ml) while a Nerd can contain 500 ml of energy drink. EDD values all types of inventories using the first-in-first-out costing method. 1.1 Budgeted information for the financial year ending 31 December 2022 The company was hacked for ransom towards the end of the year resulting in some customer information leaking. This was primarily due to their outdated firewall systems. The EDD resolved to restore backup data, however, due to the old backup systems, there was a loss of some backup data which included extracts of the budgetary information. You have been provided with the following information from the extracts the management accountant could find from the backups, with additional information supplemented through divisional meeting minutes: 1.1.1. EDD’s maximum manufacturing capacity is based on the availability of the prepared water. EDD buys the prepared water exclusively from Quench (Pty) Ltd (“Quench”) at R2,00 per litre. A maximum of 5 million litres of prepared water will be made available by Quench. Each litre of energy drink requires 900 ml of water. 1.1.2 The company budgeted to produce 15 million cans and sell 12 million cans. Both production and sales will be at a rate of two cans of Bolt for every one can of Nerd.