Anderson Winery produces a red wine called Old Vines. Recently, management has become concerned about the increasing cost of making Old Vines and needs to determine if the current selling price of $10 per bottle is adequate. The winery wants to achieve a 25 percent gross profit on the sale of each bottle. The following information is given to you for analysis:
Batch size............6,264 bottles
Costs:
Total direct materials costs .... $25,056
Total direct labor costs ....... 12,528
Total overhead costs ....... 21,924
Total production costs ....... $59,508
1. Compute the unit cost per bottle for materials, labor, and overhead.
2. How would you advise management regarding the price per bottle of wine? (Round to the nearest cent.)
3. Compute the prime costs per unit and the conversion costs per unit.