Dino s Place operates a wine outlet in Miami. One-gallon bottle sell for 18. Daily fixed costs are \$4,500 and variable cost per gallon is \$9. An average of 750 gallon is sold each day. Dino s Place ha

Dino’s Place operates a wine outlet in Miami. One-gallon bottle sell for 18. Daily fixed costs are \$4,500 and variable cost per gallon is \$9. An average of 750 gallon is sold each day. Dino’s Place has capacity of 800 gallon per day.

Required:

a. Determine the average cost per gallon.

b. Explain the difficulties of the fixed cost per unit.

c. A bus loaded with 40 tourist’s stops by closing time and the tour director offers Dino’s Place\$450 for 40 gallons. Dino’s Place refuses, saying they will lose \$3.75 on each gallon. Is Dino’s Place correct about the \$3.75? Why or why not? Explain with calculations. Should they accept the offer?

d. A fund – raising organization has offered Dino’s Place a one-year contract to buy 300 gallons a day for \$10.75 each. Should they accept the offer? Why or why not? Explain with calculations.

e. What qualitative matters would be taken in considerations with requirement c and d? Explain. Would you change the decision taken on c and d? Explain.

ATTACHMENT PREVIEW

Exercise Special Order: (BONUS)
Dino’s Place operates a wine outlet in Miami. One-gallon bottle sell for 18. Daily fixed costs
are \$4,500 and variable cost per gallon is \$9. An average of 750 gallon is sold each day.
Dino’s Place has capacity of 800 gallon per day.
Required:
a.
Determine the average cost per gallon.
b.
Explain the difficulties of the fixed cost per unit.
c.
A bus loaded with 40 tourist’s stops by closing time and the tour director offers
Dino’s Place\$450 for 40 gallons. Dino’s Place refuses, saying they will lose \$3.75
on each gallon. Is Dino’s Place correct about the \$3.75? Why or why not? Explain
with calculations. Should they accept the offer?
d.
A fund – raising organization has offered Dino’s Place a one-year contract to buy
300 gallons a day for \$10.75 each. Should they accept the offer? Why or why not?
Explain with calculations.
e.
What qualitative matters would be taken in considerations with requirement c and
d? Explain. Would you change the decision taken on c and d? Explain.