The controller for Canandaigua Vineyards, Inc. has predicted the following costs at various levels of wine output.

The company’s marketing manager has predicted the following prices for the firm’s fine wines at various levels of sales.

Required:
1. Calculate the unit costs of wine production and sales at each level of output. At what level of output is the unit cost minimized?
2. Calculate the company’s profit at each level of production. Assume the company will sell all of its output. At what production level is profit maximized?
3. Which of the three output levels is best for the company?
4. Why does the unit cost of wine decrease as the output level increases? Why might the sales price per bottle decline as sales volume increases?

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Variable production costs. Fixed production costs.. Fixed selling and administrative costs... Total........ Wine Output (.75 Liter Bottles) 10,000 Bottles 15,000 Bottles 20,000 Bottles $ 37,000 $ 55,500 $ 74,000 100,000 100,000 100,000 40,000 40,000 40,000 $177,000 $195,500 $214,000