ucate people on how to spot and properiy dispose of nazardous wast Problem 2-57

Question

ucate people on how to spot and properiy dispose of nazardous wast Problem 2-57 The controller for Canandaigua Vineyards, Inc. has predicted the following costs at various levels of Unit Costs; Profit-Maximizing wine output. Output (LO 2-7, 2-8, 2-10) Wine Output (.75 Liter Bottles) 2. Output of 20,000 bottles profit: $26,000 10,000 Bottles 20,000 Bottles Variable production costs..n Fixed production costs.... Flxed selling and administrative costs otal 37,000 100,000 40,000 $177,000 15,000 Bottles $55,500 100,000 40,000 $195,500 74,000 100,000 40,000 $214,000 The company's marketing manager has predicted the following prices for the firm's fine wines at various levels of sales.

Explanation / Answer

Income Statement Canandiagua Vineyards, Inc at various output levels of Wine .75 ltr:(in $)

26000

3. Output level at 15000 units is better for the company, at which it yield the maximum profits $ 29500.

4. Based on absorption costing principle, while increase in the unit level the amount of fixed cost is consumed by the incresed number of units which will reduce the overall cost of production per unit.

In accordance with Demand Supply price concept, If in case of increse in sales, that means supply is more than the occasional demand will lead to bargaining power of the consumer which will reduce the unit price. Sometimes it is an organisations policy to reduce the price of the unit to clear the closing inventory instead keeping as stock.

Particulars 10000 15000 20000 Sales @ per unit 18 15 12 Sale value 180000 225000 240000 Less: Cost of goods Sold Variable cost @ 3.7 per unit 37000 55500 74000 Fixed Production cost 100000 100000 100000 Total Production cost (137000) (155500) (174000) Cost per unit of production 137000/10000=13.7 155500/15000=10.36 174000/20000=8.7 Gross profit 180000-137000=43000 225000-155500=69500 240000-174000=66000 Less:Selling and Admistration expenses (40000) (40000) (40000) Net Income( Profit) 3000 29500

26000

As per Above Table: 1.a. Sales level 180000 225000 240000 b.Cost per unit of production 13.7 10.36 8.7( Lower cost per unit ) 2.a. Profit 3000 29500 26000 Profit is maximised at 15000 unit.

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