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Benton Corporation produces two grades of wine from grapes that it buys from California growers. It produces and sells roughly 3.000.000 liters per year of

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Benton Corporation produces two grades of wine from grapes that it buys from California growers. It produces and sells roughly 3.000.000 liters per year of a low-cost, high-volume product called CoolDay. It sells this in 600.000 5-liter jugs at $8 per jug. Benton also produces and sells roughly 300.000 liters per year of a low-volume, high-cost product called LiteMist. LiteMist b sold in 1-liter bottles at $5 per bottle Based on recent data, the Cool Day product has not been as profitable as LiteMist. Management is considering dropping the inexpensive Cool Day line so it can focus more attention on the LiteMist product. Benton's president is skeptical about the idea. He points out that for many decades the company produced only the CoolDay line and that it was always quite profitable. It wasn't until the company started producing the more complicated LiteMist wine that the profitability of CoolDay declined. Prior to the introduction of LiteMist. the company had simple equipment, simple growing and production procedures, and virtually no need tor quality control. Because liteMist it bottled in l-liier bonles. it requires considerably more lime and effort both to bottle and to label and box than does CoolDay. The company must botile and handle 5 times as many bonks of LiicMist lo sell the same quantity as CoolDay. CoolDay requires I month of aging; LiteMist requires I year. CoolDay requites cleaning and inspection of equipment every 10.000 liters; LiteMist requires such maintenance every 600 liters. The president has asked the accounting department to prepare an analysis of the cost per liter using the traditional costing approach and using activity-based costing. The following information was collected. Under traditional product costing using direct labor hours, compute the total manufacturing cost per liter of both products and gross profit margin. Under ABC model, compute the total manufacturing cost per liter of both products and gross profit margin. What should the company do

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