The controller for Oneida Vineyards, Inc. has predicted the following costs at various levels of wine output.

The company€™s marketing manager has predicted the following prices for the firm€™s fine wines at various levels of sales.

Required:
1. Calculate the unit cost of wine production at each level of output. At what level of output is the unit cost minimized?
2. Calculate the company€™s profit at each level of production. Assume that the company will sell all of its output. At what production level is profit maximized?
3. Which of the three output levels is best for the company?
4. Why does the unit cost of wine decrease as the output level increases? Why might the sales price per bottle decline as sales volumeincreases?

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Wine Output (.75 Liter Bottles) 10,000 Bottles 15,000 Bottles 20,000 Bottles Variable production costs Fixed production costs Fixed selling and administrative costs Total .. 44,400 120,000 48,000 $212,400 66,600 120,000 48,000 $234,600 88,800 120,000 48,000 $256,800 Wine Sales 10,000 Bottles 15,000 Bottles 20,000 Bottles $18.00 Sales price per 75 liter bottle. $21.60 $14.40