Coates grows a unique grape variety that they use to produce two grades of organic grape juice that is in high demand. Coates use all the grapes they can grow to produce their juice and this contains 100% organically grown fruit. The company neither buys nor sells grapes. Because of the uniqueness and difficulty of growing the grapes, mainly due to unpredictable weather, Coates can only produce a total of 8,000 barrels in a normal year.

A good growing season might yield a total of 10,000 barrels (4,000 of luxury and 6,000 of standard) grade juice, whereas bad weather can cut production to a total of 5,000 barrels (2,000 of luxury and 3,000 of standard) juice. Production of the two grades of juice are always produced in the same proportions.

In a normal year Coates expects to sell its grape juice to wholesalers for 120 per barrel for luxury and 105 per barrel for standard. The following table is a summary of Coates managers' expected costs for a normal year.

Fixed Luxury Standard costs juice juice per year per barrel per barrel E E E Sales price 120.00 105.00 Grape costs 240,000 2.10 1.90 Labour 75,000 2.15 2.15 Packaging 14.00 14.00 Selling and 36,000 administration Energy and Water 4,000 0.75 0.75 costsCategory of expense E Grapes 260,000 Labour 98,000 Packaging 83,000 Selling and administration 39,000 Energy and Water costs 8,800