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 50-gallon batch.

2,450 ounces of grape concentrate at $0.07 per ounce
54 pounds of granulated sugar at $0.50 per pound
60 lemons at $0.85 each
200 yeast tablets at $0.29 each
250 nutrient tablets at $0.11 each
2,900 ounces of water at $0.005 per ounce

Hank estimates that 2% of the grape concentrate is wasted, 10% of the sugar is lost, and 25% of the lemons cannot be used.

Compute the standard cost per gallon. (of wine)

Answer 1

Answer: First, let's calculate the total cost of all the inputs:

Cost of grape concentrate = 2,450 * $0.07 = $171.50

Cost of granulated sugar = 54 * $0.50 = $27

Cost of lemons = 60 * $0.85 = $51

Cost of yeast tablets = 200 * $0.29 = $58

Cost of nutrient tablets = 250 * $0.11 = $27.50

Cost of water = 2,900 * $0.005 = $14.50

Next, let's calculate the amount of each input that is actually used:

Grape concentrate used = 2,450 * (1 - 0.02) = 2,401 oz

Sugar used = 54 * (1 - 0.10) = 48.6 lbs

Lemons used = 60 * (1 - 0.25) = 45

Yeast tablets used = 200

Nutrient tablets used = 250

Water used = 2,900 oz

Now, we can calculate the total cost of the inputs that are actually used:

Total cost of inputs used = $171.50 + $27 + $51 + $58 + $27.50 + $14.50 = $350.50

Finally, we can calculate the standard cost per gallon:

Standard cost per gallon = Total cost of inputs used / Number of gallons produced

Number of gallons produced = 50

Standard cost per gallon = $350.50 / 50 = $7.01 per gallon

Therefore, the standard cost per gallon of wine is $7.01.

Explanation: