Classic Pen Company Case Essay

4567 Words May 3rd, 2013 19 Pages
A VOTRE SANTÉ: PRODUCT COSTING AND DECISION ANALYSIS IN THE WINE INDUSTRY

Priscilla S. Wisner
Department of Accounting and Information Management College of Business University of Tennessee 638 Stokely Management Center Knoxville, TN 37996 Phone: 865.974.1714 Email: pwisner@utk.edu

Case: A Votre Santé Page 1 of 17

Electronic copy available at: http://ssrn.com/abstract=1659912

BACKGROUND A Votre Santé (AVS) is a small, independent winery owned by Kay Aproveche. Kay has a relationship with a grower who grows two types of wine grapes, a Chardonnay and a generic white grape. AVS buys the grapes at the point that they have ripened on the vine. AVS is responsible for harvesting the grapes and all further processing of the grapes
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Lab expenses – Lab expenses of $8,000 are incurred for lab supplies and equipment. The lab is used by the production supervisor and the wine master to test the grapes and wine at various stages of production. Liquor taxes – AVS is required to pay a liquor excise tax of $3/bottle on every bottle of wine sold. Production office – AVS pays a part-time person to help administer the production function. This person orders supplies, reviews and approves production invoices, and performs other administrative functions. The production office budget is estimated to be a flat rate of $12,000. Sales and related – Kay’s sister, Bebe Cadadia, is paid $30,000/year on a contract basis to sell AVS wines. She works through distributors, who are paid $2/bottle for each bottle sold. Supervision – Kay’s brother, Kan Pai, supervises the production of wine from the harvest through the bottling processes. His salary and benefits total $55,000 annually.
Case: A Votre Santé Page 5 of 17

Utilities – Utilities costs are incurred primarily to maintain a constant temperature in the fermenting process. These are expected to be $5,500. Waste treatment – After crushing, the pulp, skins and stems that are left over must be disposed of. One-half of the waste can be recycled back onto the fields as a compost material; the other one-half must be disposed of at a landfill dumping cost of $2,000. A winemaster is employed to help formulate and test the

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