The Pattia Winery is one of the finest wineries in the country. One of its famous produces 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 …………………………….. 10,550 bottles
Costs 
Direct materials 
Olen Millot grapes ………………………… $ 22,155
Chancellor grapes …………………………….. 9,495
Bottles ………………………………………… 5,275
Total direct materials cost ………………….. $36,925
Direct labor
Pickers/loaders ……………………………… $ 2,110
Crusher ………………………………………….. 422
Processors …………………………………….. 8,440
Bottler ……………………………………….. 13,293
Total direct labor costs …………………….. $24,265
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 …………………………………… 633
Total overhead costs ……………………….. $.34,815
Total production costs ………………………$ 96,005
1. Compute the unit cost per bottle for materials, labor, and overhead.
2. How would you advice management regarding the price per bottle of wine?
3. Compute the prime costs per unit and the conversion costs per unit.