The Pattia Winery is one of the finest wineries in the country.

The Pattia Winery is one of the finest wineries in the country. One of its famous products is a red wine called Old Vines. Recently, management has become concerned about the increasing cost of making Old Vines and needs to determine if the current selling price of $10 per bottle is adequate. The winery wants to achieve a 25 percent gross profit on the sale of each bottle. The following information is given to you for analysis.

Batch size 

Costs 

Direct materials 

Olen Millot grapes

$22,155

Chancellor grapes

9,495

Bottles

$36,925

Total direct materials costs

5,275

Direct labor 

Pickers/loaders

$2,110

Crusher

422

Processors

8,440

Bottler

$24,265

Total direct labor costs

13,293

Overhead 

Depreciation, equipment

$2,743

Depreciation, building

5,275

Utilities

1,055

Indirect labor

6,330

Supervision

7,385

Supplies

9,917

Repairs

1,477

Miscellaneous

$96,005

Total overhead costs

$34,815

Total production costs

633

1. Compute the unit cost per bottle for materials, labor, and overhead.

2. How would you advise management regarding the price per bottle of wine?

3. Compute the prime costs per unit and the conversion costs per unit.

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