Problem 1

Rock Island Beers, a brewer of craft beers, is developing a new pale ale brand. In evaluating the costs and profits they might generate on the brand; the companys accountant prepared the following production cost estimates:

Cost Information
Average hourly wage per brewer	$12.25
Malt, hops, & yeast (per pack)	$1.75
Other brewing costs (per pack)	$0.75
Material cost (per bottle)	$0.03
All other batch costs	$120.00

Ignoring the fermentation process, brewing pale ale takes about 6 hours per batch and requires two brewers. Rock Island yields 4 cases of beer per batch.

Rock Island ships its beer in cases. Each case contains 10 packs of beer with six bottles in each pack.

Required

Using the information from above:

1. Develop a cost estimation equation for producing a single batch of pale ale.

2. Assuming the company forecasts production of 400 cases of pale ale per quarter, estimate their total quarterly production cost.

3. The initial selling price of pale ale will be $1.15 per bottle. Based on your analysis, at $1.15 per bottle, estimate the contribution margin for a pack of pale ale.