1c). Preparing for my upcoming mid-term using these practice problems. Would be grateful if one could help. Course: Managerial Accounting
The Town Brewery History: The Town Brewery is a microbrewery located in the suburbs just north west of Boston, and local beer enthusiasts are devoted and passionate for their unique and hearty ales. Founded in 1993, The Town Brewery originally became popular for its American Pale Ale, a crafted English ale, distinguished by its use of American ingredients of Cascade and Nugget hops. Pale amber in color, its malty character and crisp clean hop finish is what distinguishes this ale from the others. A microbrewery is a small brewery, which is known for producing craft beer. By definition, a microbrewery is a brewery that produces less than 15,000 barrels of beer a year. Over the past ten years, the number of microbreweries has grown considerably, as beer lovers continue to search for their perfect taste. The production process: The production of beer is a simple process that transforms malts, hops and yeast into beer. First the malts are selected. The types of malts will determine the flavor, color and style of the beer. The malts are grinded and mixed with hot water to make wort. Wort is basically a sweet unfermented beer, and will be the food the yeast will need to make alcohol. Next, for additional flavor, the wort is boiled and the hops are added. After cooling, adding yeast will be the start of the fermenting process. The beer will then be stored in fermenting tanks for about two weeks, at which time it will be carbonated and packaged. About the data: The variable selling expenses relate to the commission paid to the sales staff when they sell a case of beer. The commission is paid when the sales person successfully makes a sale either by phone or from a sales visit. Once the sale is made, the product is shipped to the customer. The variable delivery costs relates to the costs of delivering the case of beer. The following data was for an entire year of operations and the decisions presented were all decisions that were actually considered by the brewery. Please use only relevant information when completing the case. One case of Pale Ale per unit Selling price $25 current volume 26,000 cases (24 beers in a case) Variable costs malts $2.60 hops $1.75 yeast $0.50 packaging $5.00 *other production costs $4.50 *5 gallons of water for every gallon of beer, CO2, utilities, taxes shipping $2.40 selling $1.25 Fixed Costs Salary brewer Salalry driver rent truck depreciation promotion exp total fixed up to 28,000 capacity $1.15 $30,000.00 $0.77 $20,000.00 $1.92 $50,000.00 $0.92 $24,000.00 $0.19 $5,000.00 #1c). We just made what we thought was another fabulous barrel of beer. We bottled, packaged, and shipped it to customers only to find out that we put too much CO2 in the bottles. Although the beer is good, when the customers open them, they are very foamy! Our customers are not happy and want a refund. They can either throw away the remaining cases of beer, or have us pick up the remaining cases. If we pick up the beer, we can sell the cases as is at the brewery as seconds. Selling at the brewery would mean that our sales people are not involved, so we would not incur any additional selling expenses. It also means that nothing will be repackaged. What costs are relevant to set a minimum selling price for the beer if we sell it from the Brewery: (RELEVANT COSTS) (SUNK COSTS)
