#6 Our brewer is a true artist and would like to make a Belgian style beer. This
ID: 2561627 • Letter: #
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#6 Our brewer is a true artist and would like to make a Belgian style beer. This beer would require 30% more malts and 20% more hops than our regular beer. It would also require an entirely different kind of yeast to be added to what we already use, which he plans on cultivating himself at no additional cost. The beer would be stored in oak barrels for six months. There would be no need for additional equipment to further this process and luckily the brewer has some oak barrels on hand. Storage for the barrels is not a problem. We have plenty of room in the brewery. This Belgian style beer will have a deeper and richer taste and a higher alcohol content than our regular beer. Because of this, it would be sold in four packs for $14. Should the brewery sell the beer as is, or further process it into the Belgian style Ale? (SELL OR PROCESS FURTHER)
One case of Pale Ale per unit Selling price $25 current volume 26,000 cases (24 beers in a case) malts $2.60 hops $2.40 yeast $0.50 packaging $5.00 *other production costs $4.50 *5 gallons of water for every gallon of beer, CO2, utilities, taxes shipping $1.75 selling $1.25 total variable costs $18.00 total fixed up to 28,000 capacity Salary brewer $1.15 $30,000.00 Salalry driver $0.77 $20,000.00 rent $1.92 $50,000.00 truck $0.92 $24,000.00 promotion exp $0.19 $5,000.00 total costs $22.96#6 Our brewer is a true artist and would like to make a Belgian style beer. This beer would require 30% more malts and 20% more hops than our regular beer. It would also require an entirely different kind of yeast to be added to what we already use, which he plans on cultivating himself at no additional cost. The beer would be stored in oak barrels for six months. There would be no need for additional equipment to further this process and luckily the brewer has some oak barrels on hand. Storage for the barrels is not a problem. We have plenty of room in the brewery. This Belgian style beer will have a deeper and richer taste and a higher alcohol content than our regular beer. Because of this, it would be sold in four packs for $14. Should the brewery sell the beer as is, or further process it into the Belgian style Ale? (SELL OR PROCESS FURTHER)
Explanation / Answer
Cost of extra malt = 30% of $2.6 = 0.78
Cost of extra hops = 20% of $2.4 = 0.48
Total incremental costs = 0.78+0.48 = 1.26
Sale Price $14
For IPA $4.17 incremental Revenue
Incremental Revenue 14-4.17= 9.83
Income = 9.83-1.26 = $8.57 per case .
Thus the beer should be processed further.
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