Hank Itzek manufactures and sells homemade wine, and he wants to develop a stand

Question

Hank Itzek manufactures and sells homemade wine, and he wants to develop a standard cost per gallon. The following are required for production of a 70-gallon batch. 4,000 ounces of grape concentrate at $0.06 per ounce 134 pounds of granulated sugar at $0.46 per pound 74 lemons at $0.64 each 210 yeast tablets at $0.26 each 140 nutrient tablets at $0.17 each 3,700 ounces of water at $0.004 per ounce Hank estimates that 2% of the grape concentrate is wasted, 8% of the sugar is lost, and 21% of the lemons cannot be used. Compute the standard cost of the ingredients for one gallon of wine. (Round intermediate calculations and final answer to 2 decimal places, e.g. 1.25.) Standard Cost Per Gallon?:

Explanation / Answer

Requirement for 70 gallon batch:

1) 4000 onces grapes, Since 2% of concentrate is wasted, grapes remaining are 98% of purchase.

So, Purchase = 4000/98% = 4081.63 ounces; Cost = $0.06 * 4081.63 = $244.90

2) 134 pounds of sugar. Since 8% of sugar is lost, sugar remaining is 92% of purchase.

So, Purchase = 134/92% = 145.65 pounds; Cost = $0.46 * 145.65 = $67.00

3) 74 lemons. Since 21% of lemons cannot be used, lemons remaining are 79% of purchase.

So, Purchase = 74/79% = 93.67 = 94 (ecause lemons cannot be in fraction); Cost = $0.64 * 94 = $60.16

4) 210 yeast tablets; Cost = $0.26 * 210 = $54.60

5) 140 nutrient tablets; Cost = $0.17 * 140 = $23.80

6) 3,700 ounces of water; Cost = $0.004 * 3700 = $14.80

So, Total Cost for 70 gallon batch = $244.90 + $67.00 + $60.16 + $54.60 + $23.80 + $14.80 = $245.26

Standard Cost per gallon = $245.26/70 = $3.50 per gallon

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