| Relevant Costs for Decision-Making | | | | | |
| Instructions: Complete the yellow-shaded cells. | | |
| | | | | Product to Drop: | | | |
| | Estate | Blend | Table | Total | $ Remaining After Drop | Increase (Decrease) | |
| | | | | | | | |
| Sales | | | | $ - | $ - | $ - | |
| Total Variable costs | | | | $ - | $ - | $ - | |
| Contribution Margin | | | | $ - | $ - | $ - | |
| Total Fixed Costs | | | | | | $ - | |
| Net Income (before Taxes) | | | | $ - | $ - | $ - | |
| | | | | | | | |
| Should one of the wines be Dropped from the Product Mix? Please Explain your reasoning. | |
| | |
| Grizzly Bear Winery | | | | | | | |
It is about the Grizzly Bear Winery Scenario which is the information given at the bottom
ACC 550 Comprehensive Term Project Grizzly Bear Winery (GBW) is a small winery in Portland, OR, Kerry Smith is the CEO and President of the Board of Directors, which is made up of local business owners and professionals. In 2018, GBW had a net margin loss of (-5%) on Sales of approxi- mately $882,500. The company pays a 21% corporate tax rate in the year's when it has a profit. GBW has a relationship with a local vineyard owner who grows two types of wine grapes; a Cabernet and a generic red grape. Last year GBW bought 75,000 lbs. of Cabernet grapes, and 150,000 lbs. of generic grapes. The vineyard can guarantee this amount every year. After the grapes are harvested, they are brought to the winery for processing into wine. The Cabernet wine is fermented in oak barrels. The generic wine is fer- mented in a stainless steel tank. GBW bottles three wines: Cabernet Estate, a Blended wine, and a Red Table wine. The Cabernet Estate varietal contains only Cabernet grapes and requires 4 lbs of Cabernet grapes. The sales price is $23/bottle. The blended wine is made by combining 1 lb of Cabernet grapes and 2 lbs of generic grapes. The different grapes are fermented separately and blended be fore bottling. The sales price is $17/bottle The Table wine is made from only generic grapes and requires 3 lbs of grapes. The sales price is $5.50/bottle. All three wines are packaged at the GBW facility. Current year Sales and unit prices are shown below. Demand for each product is expected to grow significantly, as shown. T fi th ne Ad Dir Table 1: Sales Dato Dir Price per bottle of bottles old Tab Expected Demand next year) AZ000 CO Etale 32100 51700 25.000 DH-MJO9C2B2 All d-Onlyl. Word Table $5.50 33,000 20.000 56.000 120.000 Since demand is strong and the company sells all of the wine it produces, the CEO suspects that one of the wine varietals is not profitable and is therefore causing the company to be in the red. She needs your help in determining if any of the products are dragging down the profit margin, and if so, what should be done about it. She would like to know if she should cut-pay for some employees, raise prices, change the sales mix, or drop a product. Additionally, the CEO was recently offered the opportunity to buy additional grapes from another vineyard at current market prices. With a fixed capacity of 95,000 bot- tles, the winery has had enough capacity to meet demand up to this point. Thus far, the only factor that has limited the amount of wine produced has been the number of pounds of grapes that were available to be purchased. The new supplier has can offer an additional 100,000 pounds of Cabernet grapes at $1.15/lb., and an addi- tional 100,000 pounds of the generic grapes at $0.78/1b. This is the same price as the current supplier. The new supplier requires purchase of the grapes in large bins that hold 10,000 lbs of grapes. Therefore, this constraint will affect production plan ning to minimize waste. The CEO would like to understand the implications of this opportunity and how the financial situation would change if she were to buy the extra grapes. Finally, given that demand is so strong, the CEO would like your recommendation on whether or not you would recommend increasing plant capacity. Additional Cost Data Direct Labor Direct Labor Wage rate is $12/hr. Table 2: Direct Labor costs ACC550 COURSE INFO_Term Project_Case_Write-up, Mary Estate Blend Table $3.00 $2.40 $1.80 0.25 0,20 0.15 Direct Materials Table 3: Direct Materials Costs Direct Materials by product Estate Blend Table Cost per bottle $ $ $ 4.63 4.15 3.25 Overhead Costs GBW currently computes overhead costs by using traditional cost allocation meth- ods, but is considering using Activity based costing. GBW believes that there are three drivers of indirect costs, the number of varietals produced, the number of pal lets ordered, and the number of manufacturing hours per year. The factory has ca- pacity of 95,000 bottles, and runs on a 24/7 schedule. There are 8,760 manufactur- ing hours per year (24 hours x 365 days). Table 4: ABC Activity Cost Pools Expected Activity level Activity Pools Winemaking Customer Orders Production Support Cost Driver of varietals of pallets Whours 583 . Sales Commissions: Distributors are paid a commission of $60 per pallet ordered. Each pallet contains 10 cases, or 120 bottles of wine. In 2018, distributors or dered 583 pallets, for total commissions paid of $35,000. Recycled scrap grapes: If any juice remains after filling the oak barrels and the stainless steel tank, it cannot be saved for the next year. Therefore, it is com- posted back into the vineyard. Because of this, ending raw materials is always val- ued at zero, and the cost of the unused grape juice, which the company refers to as "Recycled Scrap Grapes", is treated as a variable overhead cost. This cost is the ad-Only] - Word difference between the raw materials purchased and the raw materials consumed in production, dependent on the number of varietals produced. Utilities - fermenting process: Utility costs are incurred primarily to maintain a constant temperature in the fermenting process. These costs were $5,470. This cost depends on the number of manufacturing hours per year. Since the company runs at near capacity, this cost is not expected to fluctuate unless additional ca- pacity were added. In this case it is expected that the cost would rise proportion- ately to the number of additional bottles produced. The ratio is approximately $0.11 per additional bottle. Waste treatment: After crushing, the pulp, skins, and stems that are left over must be disposed of. One-half of the waste can be recycled back onto the fields as a compost material; the other one half, must be disposed of at a landfill for a dumping cost of $2,000. Wine Master fee: A Master Enologist (Wine maker) formulates and tests the wines. GBW pays the wine master $10,000 per year per varietal for a total of $30,000 Lab Fees: Additionally, the Wine Master uses a local lab for testing the wines at Tvarious stages of production. Lab fees are approximately $15,000 per year. Sales Manager: one full-time employee is paid $85,000/year to sell the GBW wines through distributors. Production Supervisor: There is one production supervisor. His salary and bene fits total $75,000 annually. Administrative salaries: the CEO $100,000 annually, and the office staff earn an additional $75,000 combined. - Rent Expense: Administrative rent expenses for the sales office in Portland, OR are $24,000/yr. The following account balances are for the last day of the reporting period, Dec 31, 2018. . ACC550_COURSE INFO Term u are Account Balance Account List Dec 31, 2018 Administrative Office Rent $ 24.000 Administrative salaries $ 175,000 Bottle, labels, corks $ 35.240 Bottling labor 5 21,000 Boxing & Crating labor S 4.200 Boxes $ 12.550 Crush labor s 5.200 Depreciation $ $4,000 Fermenting ingredients $ 15,520 Grapes 203,250 Harvest labor $ 125.000 Lab expenses $ 15,000 Production Supervisor salary $ 75,000 Recycled Scrap grapes S 3,080 Sales commissions $ 35.000 Sales manager salary $ 85.000 utilities - fermenting process 5 5,470 Waste treatment 5 2,000 wine master contract rate for a varietals $ 30.000 Check figure total 5 925 510 apply Calibri 11 General a X Cut Copy Format Painter NO Wrap Test A. Merge Center B TU $ - % 6.9 Conditional Format ch Formatting Table Clipboard Font Alignment Number 12 Se Should one of the wines be Dropped from the Product Mix? Please Explain your reasoning A G H Relevant Costs for Decision-Making Instructions: Complete the yellow shaded cells. Product to Drop: SRemaining Alter Drop Increase (Decrease) Blend Estate Total Table $ $ S S $ Sales Total Variable costs Contribution Margin Total Fixed Costs Net Income (before Taxes) S S $ s 0 1 Should one of the wines be Dropped from the Product Mix? Please Explain your reasoning, 13 14 15 16 17 18 19 20 21 22 23 ABOEDKT ABCD Sute Quote nese Emphasis Subtle Em Heading Strong 1 No 1 No Spa Hosg S. Parah Style Grizzly Bear Winery (Gowa small winery in Portland, OR. Kell Smith is the CEO and President of the Board of Directors, which is made up of local business owners and professionals. In 2018, GBW had a net margin loss of Son Sales of approximately $887.500 The company pays a 21% corporate tax rate in the years when it has a profit GBW has a relationship with a local raro owner who ows two types of wine grapes: a Cabernet anda penend red grape. Last year GBW bought 75.000 lbs. of Cabernet grapes, and 150,000 lbs. of generic grapes The vineyard can guarantee this amount every year After the grapes are barvested, they are bronto the winery for processing into wine. The Cabernet wine is fermented in oak barrels. The one Winelemented in a stanless steel tank gew bottles three wines: Cabernet Estate, Blended wine, and Red Table wine . The Cabernet Estate vanetal contains only Cabernet tropes and requires 4 lbs of Cabernet grapes. The sales price is $28/bottle The blended wine is made by combining of Cabernet grapes and 2 lbs of generic grapes The different grapes are fermented party and blended before bottling. The sales prices $17/bottle. The Table wine is made from only generic grapes and requires 3 lbs of grapes. The sales price is $5.50/bottle All three wines are packaged at the GBW Facility. Current year Sales and unit prices are shown below. Demand for each product is expected to grow gnificantly as shown. To Series One Price per bottle Estate Blend $23.00 $17.00 $5.50 of bottles Bold 12.000 2 ) 38.000 120.000 Expected Demand next yea 42.000 30.000 56,000 128.000 Table Since demand is strong and the company sell all of the wine it produces the CEO suspects that one of the wine varietals is not profitable and therefore causing the company to be in the red. She needs your help in determining if any of the products are drame down the profit margin, and if so, what should be done about it. She would like to know she should cut pay for some employees ralse prices change the sales mix, or drop a product Additionally, the CEO was recently offered the opportunity to buy additional grapes from another vincard at current market prices, with a fixed capacity of 95.000 bottles, the winery has had enough capacity to meet demand up to this point. Thus far, the only factor that has limited the amount of wine produced has been the number of pounds of rapes that were available to be purchased. The new supplier has can offer an additional 100,000 pounds of Cabernet grapes at $1.15., and an additional 100,000 pounds of the generic grapes a $0.7This is the same price as the current supplier. The new supplier requires purchase of the grapes in large bins that hold 10,000 lbs of grapes. Therefore, this constraint will affect production planning to minimize waste The CEO would like to understand the implications of this opportunity and how the financial situation would change if she were to buy the extra grapes. Finally, given that demand is so strong, the CEO would like your recommendation on whether or not you would recommend increasing plant capacity. Additional Cost Data Direct Labor Direct Labor Wage rate is $12/hr. Table 2 Direct Labor costs Direct labor by product Cost per bottle Estate $3.00 Blend $2.40 Table $1.80 Hours of labor per bottle 0.25 0,20 015 Direct Materials Tables Direct Materials costs Cost per Direct Materials by product Estate Blend Table bottle $ S S 4.63 4.15 3.25 Overhead Costs GBW currently computes overhead costs by using traditional cost allocation methods, but is considering using Activity-based costing GBW believes that there are three drivers of indirect costs, the number of varietais produced, the number of pallets ordered, and the number of manufacturing hours per year. The factory has capacity of 95,000 bottles, and runs on a 24/7 schedule. There are 8,760 manufacturing hours per year 24 hours x 365 days) Tobile Accor Pools Activity Pools Winemakin Customer Orders Production Support Expected Activity Level 3 Cost Oriver of vartals of pallets Mous 8760 Sales Commissions: Distributors are paid a commission of 560 per pallet ordered. Each pallet contains 10 cases, or 120 bottles of wine. In 2018, distributors ordered 583 pallets, for total commissions paid of $35.000 Recycled scrap rapes: If any juice remains after filling the oak barrels and the stainless steel tank it cannot be saved for the next year. Therefore, it is composted back into the vineyard. Because of Style the ending raw materials is always valued at zero, and the cost of the unused grape juice, which the company refers to as "Recycled Scrap Grapes, is treated as a variable overhead cost. This cost is the difference between the raw materials purchased and the raw materials consumed in production, dependent on the number of varietals produced Utilities - fermenting process: Utility costs are incurred primarily to maintain a constant Temperature in the fermenting process. These costs were $5,470. This cost depends on the number of manufacturing hours per year. Since the company runs at near capacity, this cost is not expected to Tluctuate unless additional capacity were added in this case it is expected that the cost would rise proportionately to the number of additional bottles produced the ratio is approdimately 50, 11 per additional bottle Waste treatment: After crushing the pulp, skins, and stems that are left over must be disposed of One-half of the waste can be recycled back onto the fields as a compost material, the other one- hall, must be disposed of at a landfill for a dumping cost of $2,000, Wine Master fee: A Master Enologist (Wine-maker) formulates and tests the wines. GBW pays the wine master $10,000 per year per varietal for a total of $30,000 Lab Fees: Additionally, the Wine Master uses a local lab for testing the wines at various stages of production Lab fees are approximately $15,000 per year. Sales Managerone full-time employee is paid $85,000/year to sell the GBW wines through distributors Production Supervisor: There is one production supervisor. His salary and benefits total 575,000 annually Administrative salaries: the CEO S100,000 annually, and the office staff earn an additional $75,000 combined Rent Expense: Administrative rent expenses for the sales office in Portland, OR are $24,000/y. . . . . . The following account balances are for the last day of the reporting period, Dec 31, 2018 Account List Administrative Office Rent Administrative salaries Bottle, labels, corks Botting labor Boxing & Coating labor Boxes Crosh labor Depreciation Fermenting ingredients Grapes Harvest labor Lab expenses Production Supervisor salary Recycled Scrap propes Sales comissions Sales manager salary Utilities fermenting process Waste treatment Wine master contract rate for varias Check figure total Account Balance Dec 31, 2018 5 24,000 5 175,000 $ 35.240 5 21.000 5 4.200 5 12.550 $ 5,200 5 54.000 5 15,520 5 203,250 $ 125.000 5 25.000 $ 75.000 3.000 5 35.000 5 95.000 5 5470 2,000 30.000 ACC 550 Comprehensive Term Project Grizzly Bear Winery (GBW) is a small winery in Portland, OR, Kerry Smith is the CEO and President of the Board of Directors, which is made up of local business owners and professionals. In 2018, GBW had a net margin loss of (-5%) on Sales of approxi- mately $882,500. The company pays a 21% corporate tax rate in the year's when it has a profit. GBW has a relationship with a local vineyard owner who grows two types of wine grapes; a Cabernet and a generic red grape. Last year GBW bought 75,000 lbs. of Cabernet grapes, and 150,000 lbs. of generic grapes. The vineyard can guarantee this amount every year. After the grapes are harvested, they are brought to the winery for processing into wine. The Cabernet wine is fermented in oak barrels. The generic wine is fer- mented in a stainless steel tank. GBW bottles three wines: Cabernet Estate, a Blended wine, and a Red Table wine. The Cabernet Estate varietal contains only Cabernet grapes and requires 4 lbs of Cabernet grapes. The sales price is $23/bottle. The blended wine is made by combining 1 lb of Cabernet grapes and 2 lbs of generic grapes. The different grapes are fermented separately and blended be fore bottling. The sales price is $17/bottle The Table wine is made from only generic grapes and requires 3 lbs of grapes. The sales price is $5.50/bottle. All three wines are packaged at the GBW facility. Current year Sales and unit prices are shown below. Demand for each product is expected to grow significantly, as shown. T fi th ne Ad Dir Table 1: Sales Dato Dir Price per bottle of bottles old Tab Expected Demand next year) AZ000 CO Etale 32100 51700 25.000 DH-MJO9C2B2 All d-Onlyl. Word Table $5.50 33,000 20.000 56.000 120.000 Since demand is strong and the company sells all of the wine it produces, the CEO suspects that one of the wine varietals is not profitable and is therefore causing the company to be in the red. She needs your help in determining if any of the products are dragging down the profit margin, and if so, what should be done about it. She would like to know if she should cut-pay for some employees, raise prices, change the sales mix, or drop a product. Additionally, the CEO was recently offered the opportunity to buy additional grapes from another vineyard at current market prices. With a fixed capacity of 95,000 bot- tles, the winery has had enough capacity to meet demand up to this point. Thus far, the only factor that has limited the amount of wine produced has been the number of pounds of grapes that were available to be purchased. The new supplier has can offer an additional 100,000 pounds of Cabernet grapes at $1.15/lb., and an addi- tional 100,000 pounds of the generic grapes at $0.78/1b. This is the same price as the current supplier. The new supplier requires purchase of the grapes in large bins that hold 10,000 lbs of grapes. Therefore, this constraint will affect production plan ning to minimize waste. The CEO would like to understand the implications of this opportunity and how the financial situation would change if she were to buy the extra grapes. Finally, given that demand is so strong, the CEO would like your recommendation on whether or not you would recommend increasing plant capacity. Additional Cost Data Direct Labor Direct Labor Wage rate is $12/hr. Table 2: Direct Labor costs ACC550 COURSE INFO_Term Project_Case_Write-up, Mary Estate Blend Table $3.00 $2.40 $1.80 0.25 0,20 0.15 Direct Materials Table 3: Direct Materials Costs Direct Materials by product Estate Blend Table Cost per bottle $ $ $ 4.63 4.15 3.25 Overhead Costs GBW currently computes overhead costs by using traditional cost allocation meth- ods, but is considering using Activity based costing. GBW believes that there are three drivers of indirect costs, the number of varietals produced, the number of pal lets ordered, and the number of manufacturing hours per year. The factory has ca- pacity of 95,000 bottles, and runs on a 24/7 schedule. There are 8,760 manufactur- ing hours per year (24 hours x 365 days). Table 4: ABC Activity Cost Pools Expected Activity level Activity Pools Winemaking Customer Orders Production Support Cost Driver of varietals of pallets Whours 583 . Sales Commissions: Distributors are paid a commission of $60 per pallet ordered. Each pallet contains 10 cases, or 120 bottles of wine. In 2018, distributors or dered 583 pallets, for total commissions paid of $35,000. Recycled scrap grapes: If any juice remains after filling the oak barrels and the stainless steel tank, it cannot be saved for the next year. Therefore, it is com- posted back into the vineyard. Because of this, ending raw materials is always val- ued at zero, and the cost of the unused grape juice, which the company refers to as "Recycled Scrap Grapes", is treated as a variable overhead cost. This cost is the ad-Only] - Word difference between the raw materials purchased and the raw materials consumed in production, dependent on the number of varietals produced. Utilities - fermenting process: Utility costs are incurred primarily to maintain a constant temperature in the fermenting process. These costs were $5,470. This cost depends on the number of manufacturing hours per year. Since the company runs at near capacity, this cost is not expected to fluctuate unless additional ca- pacity were added. In this case it is expected that the cost would rise proportion- ately to the number of additional bottles produced. The ratio is approximately $0.11 per additional bottle. Waste treatment: After crushing, the pulp, skins, and stems that are left over must be disposed of. One-half of the waste can be recycled back onto the fields as a compost material; the other one half, must be disposed of at a landfill for a dumping cost of $2,000. Wine Master fee: A Master Enologist (Wine maker) formulates and tests the wines. GBW pays the wine master $10,000 per year per varietal for a total of $30,000 Lab Fees: Additionally, the Wine Master uses a local lab for testing the wines at Tvarious stages of production. Lab fees are approximately $15,000 per year. Sales Manager: one full-time employee is paid $85,000/year to sell the GBW wines through distributors. Production Supervisor: There is one production supervisor. His salary and bene fits total $75,000 annually. Administrative salaries: the CEO $100,000 annually, and the office staff earn an additional $75,000 combined. - Rent Expense: Administrative rent expenses for the sales office in Portland, OR are $24,000/yr. The following account balances are for the last day of the reporting period, Dec 31, 2018. . ACC550_COURSE INFO Term u are Account Balance Account List Dec 31, 2018 Administrative Office Rent $ 24.000 Administrative salaries $ 175,000 Bottle, labels, corks $ 35.240 Bottling labor 5 21,000 Boxing & Crating labor S 4.200 Boxes $ 12.550 Crush labor s 5.200 Depreciation $ $4,000 Fermenting ingredients $ 15,520 Grapes 203,250 Harvest labor $ 125.000 Lab expenses $ 15,000 Production Supervisor salary $ 75,000 Recycled Scrap grapes S 3,080 Sales commissions $ 35.000 Sales manager salary $ 85.000 utilities - fermenting process 5 5,470 Waste treatment 5 2,000 wine master contract rate for a varietals $ 30.000 Check figure total 5 925 510 apply Calibri 11 General a X Cut Copy Format Painter NO Wrap Test A. Merge Center B TU $ - % 6.9 Conditional Format ch Formatting Table Clipboard Font Alignment Number 12 Se Should one of the wines be Dropped from the Product Mix? Please Explain your reasoning A G H Relevant Costs for Decision-Making Instructions: Complete the yellow shaded cells. Product to Drop: SRemaining Alter Drop Increase (Decrease) Blend Estate Total Table $ $ S S $ Sales Total Variable costs Contribution Margin Total Fixed Costs Net Income (before Taxes) S S $ s 0 1 Should one of the wines be Dropped from the Product Mix? Please Explain your reasoning, 13 14 15 16 17 18 19 20 21 22 23 ABOEDKT ABCD Sute Quote nese Emphasis Subtle Em Heading Strong 1 No 1 No Spa Hosg S. Parah Style Grizzly Bear Winery (Gowa small winery in Portland, OR. Kell Smith is the CEO and President of the Board of Directors, which is made up of local business owners and professionals. In 2018, GBW had a net margin loss of Son Sales of approximately $887.500 The company pays a 21% corporate tax rate in the years when it has a profit GBW has a relationship with a local raro owner who ows two types of wine grapes: a Cabernet anda penend red grape. Last year GBW bought 75.000 lbs. of Cabernet grapes, and 150,000 lbs. of generic grapes The vineyard can guarantee this amount every year After the grapes are barvested, they are bronto the winery for processing into wine. The Cabernet wine is fermented in oak barrels. The one Winelemented in a stanless steel tank gew bottles three wines: Cabernet Estate, Blended wine, and Red Table wine . The Cabernet Estate vanetal contains only Cabernet tropes and requires 4 lbs of Cabernet grapes. The sales price is $28/bottle The blended wine is made by combining of Cabernet grapes and 2 lbs of generic grapes The different grapes are fermented party and blended before bottling. The sales prices $17/bottle. The Table wine is made from only generic grapes and requires 3 lbs of grapes. The sales price is $5.50/bottle All three wines are packaged at the GBW Facility. Current year Sales and unit prices are shown below. Demand for each product is expected to grow gnificantly as shown. To Series One Price per bottle Estate Blend $23.00 $17.00 $5.50 of bottles Bold 12.000 2 ) 38.000 120.000 Expected Demand next yea 42.000 30.000 56,000 128.000 Table Since demand is strong and the company sell all of the wine it produces the CEO suspects that one of the wine varietals is not profitable and therefore causing the company to be in the red. She needs your help in determining if any of the products are drame down the profit margin, and if so, what should be done about it. She would like to know she should cut pay for some employees ralse prices change the sales mix, or drop a product Additionally, the CEO was recently offered the opportunity to buy additional grapes from another vincard at current market prices, with a fixed capacity of 95.000 bottles, the winery has had enough capacity to meet demand up to this point. Thus far, the only factor that has limited the amount of wine produced has been the number of pounds of rapes that were available to be purchased. The new supplier has can offer an additional 100,000 pounds of Cabernet grapes at $1.15., and an additional 100,000 pounds of the generic grapes a $0.7This is the same price as the current supplier. The new supplier requires purchase of the grapes in large bins that hold 10,000 lbs of grapes. Therefore, this constraint will affect production planning to minimize waste The CEO would like to understand the implications of this opportunity and how the financial situation would change if she were to buy the extra grapes. Finally, given that demand is so strong, the CEO would like your recommendation on whether or not you would recommend increasing plant capacity. Additional Cost Data Direct Labor Direct Labor Wage rate is $12/hr. Table 2 Direct Labor costs Direct labor by product Cost per bottle Estate $3.00 Blend $2.40 Table $1.80 Hours of labor per bottle 0.25 0,20 015 Direct Materials Tables Direct Materials costs Cost per Direct Materials by product Estate Blend Table bottle $ S S 4.63 4.15 3.25 Overhead Costs GBW currently computes overhead costs by using traditional cost allocation methods, but is considering using Activity-based costing GBW believes that there are three drivers of indirect costs, the number of varietais produced, the number of pallets ordered, and the number of manufacturing hours per year. The factory has capacity of 95,000 bottles, and runs on a 24/7 schedule. There are 8,760 manufacturing hours per year 24 hours x 365 days) Tobile Accor Pools Activity Pools Winemakin Customer Orders Production Support Expected Activity Level 3 Cost Oriver of vartals of pallets Mous 8760 Sales Commissions: Distributors are paid a commission of 560 per pallet ordered. Each pallet contains 10 cases, or 120 bottles of wine. In 2018, distributors ordered 583 pallets, for total commissions paid of $35.000 Recycled scrap rapes: If any juice remains after filling the oak barrels and the stainless steel tank it cannot be saved for the next year. Therefore, it is composted back into the vineyard. Because of Style the ending raw materials is always valued at zero, and the cost of the unused grape juice, which the company refers to as "Recycled Scrap Grapes, is treated as a variable overhead cost. This cost is the difference between the raw materials purchased and the raw materials consumed in production, dependent on the number of varietals produced Utilities - fermenting process: Utility costs are incurred primarily to maintain a constant Temperature in the fermenting process. These costs were $5,470. This cost depends on the number of manufacturing hours per year. Since the company runs at near capacity, this cost is not expected to Tluctuate unless additional capacity were added in this case it is expected that the cost would rise proportionately to the number of additional bottles produced the ratio is approdimately 50, 11 per additional bottle Waste treatment: After crushing the pulp, skins, and stems that are left over must be disposed of One-half of the waste can be recycled back onto the fields as a compost material, the other one- hall, must be disposed of at a landfill for a dumping cost of $2,000, Wine Master fee: A Master Enologist (Wine-maker) formulates and tests the wines. GBW pays the wine master $10,000 per year per varietal for a total of $30,000 Lab Fees: Additionally, the Wine Master uses a local lab for testing the wines at various stages of production Lab fees are approximately $15,000 per year. Sales Managerone full-time employee is paid $85,000/year to sell the GBW wines through distributors Production Supervisor: There is one production supervisor. His salary and benefits total 575,000 annually Administrative salaries: the CEO S100,000 annually, and the office staff earn an additional $75,000 combined Rent Expense: Administrative rent expenses for the sales office in Portland, OR are $24,000/y. . . . . . The following account balances are for the last day of the reporting period, Dec 31, 2018 Account List Administrative Office Rent Administrative salaries Bottle, labels, corks Botting labor Boxing & Coating labor Boxes Crosh labor Depreciation Fermenting ingredients Grapes Harvest labor Lab expenses Production Supervisor salary Recycled Scrap propes Sales comissions Sales manager salary Utilities fermenting process Waste treatment Wine master contract rate for varias Check figure total Account Balance Dec 31, 2018 5 24,000 5 175,000 $ 35.240 5 21.000 5 4.200 5 12.550 $ 5,200 5 54.000 5 15,520 5 203,250 $ 125.000 5 25.000 $ 75.000 3.000 5 35.000 5 95.000 5 5470 2,000 30.000
