Assigning Overhead Costs Using Volume - Based Costing

Heavenly Wines Inc. produces two types of wine. The first is a standard-variety chardonnay produced in large batches and aged for a relatively short period of time (about four months) in large metal containers (vats). The second wine is a limited-edition cabernet made in very small batches from premium grapes and then aged for more than three years in special French oak barrels to provide a particular taste. The barrels require significant maintenance between batches and can be used only a few times before they lose some of the oak flavor that they transfer to the wine. The company currently uses a volume-based cost system with total manufacturing overhead cost of P18,750,000 applied to the two products at a rate of 150 percent of direct labor dollars. Assume the following production and cost information for the most recent year:

	Standard	Vintage
	Chardonnay	Cabernet
Number of bottles produced	200,000	25,000
Unit cost information:
Direct materials (grapes and bottles)	100	200
Direct labor	50	100
Manufacturing overhead	?	?
Manufacturing cost per unit (bottle)	?	?

Required:

Compute the manufacturing cost per bottle of the two products using the volume-based cost system.