Question

he accountant of Alpha Ltd. predicted the following costs for the production of 15.000 wine bottles...

he accountant of Alpha Ltd. predicted the following costs for the production of 15.000 wine bottles (amounts in EUR)

   Wine production
   9.000 bottles   15.000 bottles   21.000 bottles
Variable production cost   ?   45.000   ?
Fixed production cost   ?   60.000   ?
Variable operating cost   ?   3.000   ?
Fixed operating cost   ?   25.000   ?


Sales manager predicted the following average selling price per bottle

       Sales of wine  
   9.000 bottles   15.000 bottles   21.000 bottles
Selling price for 1lt bottle   14   13   12

Assuming that the variable cost per unit does not change with the change in production volume:

a.   Fill in the question marks in the table and find out the variable, fixed and total cost per unit in all activity levels. Explain what you observe.
b.   Calculate the overall results (profit/loss) assuming that the company will sell its stock. To which activity level the profit is maximized ?

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