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 210-gallon batch. 3,300 ounces of grape concentrate at $0.03 per ounce 357 pounds of granulated sugar at $0.36 per pound 294 lemons at $0.63 each 840 yeast tablets at $0.28 each 1,050 nutrient tablets at $0.11 each 3,100 ounces of water at $0.001 per ounce Hank estimates that 1% of the grape concentrate is wasted, 15% of the sugar is lost, and 30% 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 $

Answer 1

Answer: $4.140 per gallon

Explanation:

Costs including wastage for 210 gallons:

3,300 ounces of grape concentrate at $0.03 per ounce:

= $3,300\times\frac{0.03}{0.99}$

= 100

357 pounds of granulated sugar at $0.36 per pound :

=  $357\times\frac{0.36}{0.85}$

= 151.2

294 lemons at $0.63 each =  $294\times\frac{0.63}{0.70}$

                                             = 264.6

840 yeast tablets at $0.28 each  = 840 × 0.28

                                                      = 235.2

1,050 nutrient tablets at $0.11 each  = 1,050 × 0.11

                                                           = 115.5

3,100 ounces of water at $0.001 per ounce = 3,100 × 0.001

                                                                         = 3.1

Hanks estimates that,

1% of the grape concentrate is wasted

15% of the sugar is lost

30% of the lemons cannot be used

Hence,

Cost for 210 gallons = 100 + 151.2 + 264.6 + 235.2 + 115.5 + 3.1

                                 = $869.6

Hence, cost per gallon = $\frac{Cost\ for\ 210\ gallons}{210\ gallons}$

                                      = $\frac{869.6}{210}$

                                      = $4.140 per gallon