Crooked Creek Wines currently distributes their products via three routes: cellar door, restaurants and bottle shops/commercial cellars.

The cellar door operates from 10am to 4pm from Tuesday to Sunday. Visitors pay $10 per person which is redeemable when the customer purchases wines. On average, 35 people come through per day for Tuesday to Friday and this doubles on Saturday and Sunday. During the weekday tastings, approximately eight bottles of wine are consumed per day with 16 bottles commonly consumed on Saturdays and Sundays. All customers tend to purchase wine sometimes a few bottles and others by the case.

Restaurants account for a significant portion of the winerys revenue. Significant effort is put into consulting with the restaurant owners and head chefs to ensure the correct pairing of wines to meals. Delivery is provided at no additional charge to the customer. Whilst every effort is made to ensure the more popular wine varieties are well stocked, occasionally special rush orders are needed.

Bottle shops and commercial cellars are a smaller source of revenue, and Crooked Creek Wines has decided to work with a small number of well-known cellars rather than use a commercial wine agent. This means that there are costs associated working with the clients to determine the brands being stoked, forward planning, and consultation regarding new varieties and changing consumer tastes.

The following information shows the revenue and cost information for the three distribution pathways for an average month:

Based on the scenario and the data provided:

1. Provide an analysis of the information about restaurant and cellar customers provide information of what constitutes analysis versus description

2. Write a short report to the management of Crooked Creek Wines highlight three areas where you feel action should be taken to improve performance.

Bottle Shops & Cellarers Customer-level costs Restaurants Activity-Cost Driver Cellar Door Operations Marketing costs Wine samples Sales orders Customer visits Distribution costs Product handling Delivery Rush orders Customer service costs Customer service Number of samples (bottles) Number of orders Number of customer visits 256 0 10 12 35 12 2245 20 3587 32 1580 Number of bottles moved Number of regular shipments Number of rush orders Number of bottles 1580 2245 3587 Cellar Door Operations Bottle Shops & Cellarers Restaurants Revenues at list price Price Discount Revenues Cost of bottles sold Gross Margin 687,500.00 2,800.00 684,700.00 330,000.00 354,700.00 825,000.00 82,500.00 742,500.00 396,000.00 346,500.00 1,375,000.00 343,750.00 1,031,250.00 660,000.00 371,250.00 Customer-level costs Marketing costs Wine samples Sales orders Customer visits Distribution costs Product handling Delivery Rush orders Customer service costs Customer service Total customer-level costs Customer-level operating profit 3,072.00 0.00 0.00 120.00 1,875.00 3,750.00 144.00 2,625.00 3,000.00 2,370.00 0.00 0.00 3,367.50 7,000.00 2,500.00 5,380.50 11,200.00 1,500.00 1,264.00 6,706.00 347,994.00 1,796.00 20,408.50 326,091.50 2,869.60 26,719.10 344,530.90