Q2. The Tesla Winery is one of the finest and oldest wineries in the country. One of its most famous products is a red table wine called Olen Millot. The wine is made from Olen Millot grapes grown in the Hudson River Valley. Recently, management has become concerned about the increasing cost of making Olen Millot and needs to determine if the current $10 per bottle selling price is adequate. The winery wants to achieve a 25 percent gross profit on the sale of each bottle of wine. The information below is given to you for analysis. 1. Compute the unit cost per bottle for materials, labor and manufacturing overhead. 2. What would you advise management regarding the price per bottle of Olen Millot wine? Defend your answer. 3. Compute the prime costs per unit and conversion costs per unit. Batch size Costs Direct Materials Olen Millot grapes Chancellor grapes Bottles Total direct materials costs Direct Labor Pickers/loaders Crusher Processors Bottler Storage and racking Total direct labor costs Manufacturing Overhead Depreciation, equipment Depreciation, building Utilities Indirect Labor Supervision Supplies Storage fixtures Chemicals Repairs Miscellaneous Total manufacturing overhead costs TOTAL PRODUCTION COSTS 10,550 bottles $22,155 9,495 5,275 $36,925 2,110 422 8,440 1,688 11,605 $24,265 2,743 5,275 1,055 6,330 7,385 3,165 2,532 4,220 1,477 633 $34,815 $96,005
Q2. The Tesla Winery is one of the finest and oldest wineries in the country. One of its most famous products is a red table wine called Olen Millot. The wine is made from Olen Millot grapes grown in the Hudson River Valley. Recently, management has become concerned about the increasing cost of making Olen Millot and needs to determine if the current $10 per bottle selling price is adequate. The winery wants to achieve a 25 percent gross profit on the sale of each bottle of wine. The information below is given to you for analysis. 1. Compute the unit cost per bottle for materials, labor and manufacturing overhead. 2. What would you advise management regarding the price per bottle of Olen Millot wine? Defend your answer. 3. Compute the prime costs per unit and conversion costs per unit. Batch size Costs Direct Materials Olen Millot grapes Chancellor grapes Bottles Total direct materials costs Direct Labor Pickers/loaders Crusher Processors Bottler Storage and racking Total direct labor costs Manufacturing Overhead Depreciation, equipment Depreciation, building Utilities Indirect Labor Supervision Supplies Storage fixtures Chemicals Repairs Miscellaneous Total manufacturing overhead costs TOTAL PRODUCTION COSTS 10,550 bottles $22,155 9,495 5,275 $36,925 2,110 422 8,440 1,688 11,605 $24,265 2,743 5,275 1,055 6,330 7,385 3,165 2,532 4,220 1,477 633 $34,815 $96,005
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Q2. The Tesla Winery is one of the finest and oldest wineries in the country. One of its most famous
products is a red table wine called Olen Millot. The wine is made from Olen Millot grapes grown in the
Hudson River Valley. Recently, management has become concerned about the increasing cost of making
Olen Millot and needs to determine if the current $10 per bottle selling price is adequate. The winery
wants to achieve a 25 percent gross profit on the sale of each bottle of wine. The information below is
given to you for analysis.
1. Compute the unit cost per bottle for materials, labor and manufacturing overhead.
2.
What would you advise management regarding the price per bottle of Olen Millot wine?
Defend your answer.
3. Compute the prime costs per unit and conversion costs per unit.
Batch size
Costs
Direct Materials
Olen Millot grapes
Chancellor grapes
Bottles
Total direct materials costs
Direct Labor
Pickers/loaders
Crusher
Processors
Bottler
Storage and racking
Total direct labor costs
Manufacturing Overhead
Depreciation, equipment
Depreciation, building
Utilities
Indirect Labor
Supervision
Supplies
Storage fixtures
Chemicals
Repairs
Miscellaneous
Total manufacturing overhead costs
TOTAL PRODUCTION COSTS
10,550 bottles
$22,155
9,495
5,275
$36,925
2,110
422
8,440
1,688
11,605
$24,265
2,743
5,275
1,055
6,330
7,385
3,165
2,532
4,220
1,477
633
$34,815
$96,005
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