Cost Accounting

Shasta Hills, a winery in British Columbia manufactures a premium white cabernet and sells primarily to distributors. Wine is sold in cases of one dozen bottles. In the year ended Dec 31 2015 Shasta sold 242,400 cases at an average selling price of $112.80 per case. The following additional data are Shasta Hills for the year ended Dec 31 2015 (Assume constant unit costs and no price, rate, or efficiency variances)

Beginning Inventory, Jan 1 2015: 32, 600 cases

Ending Inventory, Dec 31, 2015: 24, 800 cases

Fixed manufacturing overhead: $4,504.320

Fixed operating costs: $7,882,560

Variable cost per case:

Direct Materials

Grapes $19.20 per case

Bottles,corks, and crates $12.00 per case

Direct Labour:

Bottling $7.20 per case

Winemaking $16.80 per case

Aging $2.40 per case

Required:

1) Calculate cases of production for Shasta Hills for 2015

2) Find the breakeven point (number of cases) in 2015

a) Under variable costing

b) Under absorption costing

3) Grape prices are expected to increase 25% in 2016. Assuming all other data remain constant, what is the minimum number of cases Shasta Hills must sell in 2016 to break even? Calculate the breakeven point:

a) Under Variable costing

b) Under Absorption costing

4) Assume the owners of Shasta Hills want to increase 2016 operating income 10% over 2015 levels. Using the same data as in requirement 3, recalculate the target quantity of cases under variable and absorption costing. Use approximation method re absorption costing