Question
One case of Pale Ale per unit Selling price $25 current volume 26,000 cases (24 beers in a case) malts $2.60 hops $2.40 yeast $0.50
One case of Pale Ale | ||||||||
per unit | ||||||||
Selling price | $25 | current volume | 26,000 | cases (24 beers in a case) | ||||
malts | $2.60 | |||||||
hops | $2.40 | |||||||
yeast | $0.50 | |||||||
packaging | $5.00 | |||||||
*other production costs | $4.50 | *5 gallons of water for every gallon of beer, CO2, utilities, taxes | ||||||
shipping | $1.75 | |||||||
selling | $1.25 | |||||||
total variable costs | $18.00 | |||||||
total fixed up to 28,000 capacity | ||||||||
Salary brewer | $1.15 | $30,000.00 | ||||||
Salalry driver | $0.77 | $20,000.00 | ||||||
rent | $1.92 | $50,000.00 | ||||||
truck | $0.92 | $24,000.00 | ||||||
promotion exp | $0.19 | $5,000.00 | ||||||
total costs | $22.96 | |||||||
#5 A brewery in Western Massachusetts has extra capacity and has offered to make and package our beer for us. They plan on charging us $13 per case. We will still sell and deliver the beer ourselves. If we accept their offer, we will only need to rent half of our facility to store the beer so rent will continue at 60%. The Brewer will become part time and his salary will decrease by 30%. Since we will no longer need our equipment, another brewer has offered to rent our equipment for $10,000 a year. If we accept their offer, will our net income go up or down and by how much? What price per case of beer will the brewery have to offer to make us indifferent to continuing to make the beer ourselves or contract the beer from this outside source? (MAKE OR BUY) | ||||||||
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