1. All the Karmichael businesses have inventory:

Crooked Creek Wines raw materials such as grapes, work-in-process including wine in vats undergoing fermentation and wine in storage, and finished goods such as bottled wines;

Vine Dining raw materials such as vegetables, fruit, meats, and spices; and

Rolling in Dough raw materials including flour, yeast, salt and finished product in the form of bread.

The following information was provided by Crooked Creek Wines regarding their performance for last year.

Income Statement for year ending 2017
Revenue		$ ????
Cost of Goods Sold
Beginning Finished Goods Inventory	$ 312,500
Cost of goods manufactured	$ ????
Cost of goods available for sale	$ ????
Ending finished goods inventory	$ ????
Cost of Goods Sold		$1,016,285
Gross Margin		$ 733,715
Operating Costs
Marketing	$ ???
Distribution	$ 44,250
Salaries	$ 75,000
Total operating costs		$ 251,750
Operating Income		$ ????
Schedule of cost of goods manufactured
Direct Materials
Beginning direct materials inventory	$ 25,000
Purchases of direct materials	$ ????
Cost of direct materials available for use	$ 700,820
Ending direct materials inventory	$ 23,750
Direct materials used		$ 677,070
Direct manufacturing labour		$ 225,000
Manufacturing overheads
Indirect manufacturing labour	$ 53,600
Supplies	$ 13,777
Utilities	$ ????
Depreciation machinery	$ 4,300
Other expenses	$ 29,875
Total manufacturing overheads		$ 167,352
Manufacturing costs incurred during period		$ 1,069,422
Beginning work-in-process inventory		$ ????
Total manufacturing costs to account for		$ 1,744,347
Ending workin-process for period		$ ????
Cost of goods manufactured		$ 985,035

Required

a. Using the information above calculate the missing values in the above table

i. Revenue

ii. Cost of goods manufactured

iii. Cost of goods available for sale

iv. Ending finished goods inventory

v. Marketing costs

vi. Operating income

vii. Purchases of direct materials

viii. Utilities

ix. Beginning work-in-process inventory

x. Ending work-in-process inventory

b) Identify the prime cost and conversion cost for Crooked Creek Wines for the period.

c) Assuming the Crooked Creek Wines produced 65,000 bottles during this period, what is the unit cost of production?

d) Assuming the cost structures remain the same, what would be the cost per unit of manufacturing 110,000 bottles?

e) Write a short paragraph to the management of Crooked Creek Wines explaining the differences between the unit costs, if any, calculated in requirement c and d.

2. As the Try It! Questions does not provide specific context in which to analyse and interpret information, consider the following:

a) Direct materials cost is $1.70 per bottle for Crooked Creek Wines what are the direct materials included in this cost? If the industry average is $1.65 per bottle, what can this comparison tell management of Crooked Creek Wines? Consider this question considering the strategy of either product differentiation or cost leadership

b) Electricity cost for Rolling in Dough is $8000 per month regardless of the number of unit produced what type of contract does Rolling in Dough have with their electricity provider? How much is the electricity cost per unit using the figures from Topic 1?

c) Transport costs for Crooked Creek Wines includes a flat fee of $80 per day (for leased distribution truck) plus $2 per kilometre driven If Crooked Creek Wines purchased the truck and then replaced the flat free with depreciation of $2,200 per month and still retain the variable cost of $2 per kilometre driven, should they? If the lease contract includes free servicing, would you change your mind?

d) Machine operating costs for Vine Dining (kitchen appliances etc) includes $1000 of maintenance costs per month, with $12 of other costs for each day the machinery is in operation estimate the monthly cost for operating the machinery assuming 28 operating days? What other information would Vine Dining need to determine whether any of the machinery should be upgraded?

3. Cost estimation utilities

The Karmichaels property has single connections and metres for gas and water. The following information is provided regarding these utilities for the past year.

Using the high-low method, determine the liner cost function for both the gas and water costs.

Express the combined costs in a single linear cost equation.

Write an explanation of the procedure and the information it produces, as well as how this information is useful for cost management, to the Karmichaels.

	Gas		Water
	Units	Cost $	Units	Cost $
January	375	343.75	3,500	1,530.00
February	425	356.25	3,750	1,612.50
March	550	387.50	2,250	1,117.50
April	350	337.50	2,000	1,035.00
May	345	336.25	1,800	969.00
June	420	355.00	2,100	1,068.00
July	425	356.25	2,750	1,282.50
August	476	369.00	2,615	1,237.95
September	510	377.50	2,800	1,299.00
October	445	361.25	2,975	1,356.75
November	375	343.75	3,100	1,398.00
December	315	328.75	3,255	1,449.15