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.
Olen Millot grapes
Total direct materials costs
Total direct labor costs
Total overhead costs
Total production costs
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.