Factors That Affect The Pricing Decision

Factors That Affect The Pricing Decision In Finland, Lukka and Granlund (1996) observed that product cost information had its greatest importance in pricing, tendering and cost reduction decisions. In Italy, Cescon (1999) noted the most important uses of product costs were in cost reduction, pricing, make-or-buy and investment decisions, and its least important role related to decisions about distribution channels. Based on the above quotations, the costs of the product, its inputs including the amount spent on product development, testing, and packaging required to be taken into account when a pricing decision is made. Therefore, product costs are very important to make a pricing decision. In Australia, Joye and Blayney (1990) found that product costs were of major importance in the pricing decisions of the majority of companies. Therefore, cost is a  major factor that will affect pricing decisions. Variances between actual and  budgeted cost are inherent in business. Actual cost may not correspond  with budgeted cost, thus, it is important to have a thorough planning on  how can these cost affect company profit. Profit planning must take into account expected changes in cost. An   increase in cost with no corresponding change in selling price will   greatly affect company profits. Thus, the ability of the enterprise to limit suppliers bargaining power as to control the price of raw materials and production will be greatly influence the pricing decision. A products cost can be classified as fixed or variable costs, according to whether the volume changes. quoted by Dominiak Louderback, 1997. Fixed cost is the cost that  remains the same regardless of the level of production or the level of sales such as property taxes, rent, advertising, insurance, and utilities. Moreover, variable cost is the cost that changes in a directly proportion to changes in production volume such as sales commission, packaging, labeling and shipping costs. In many manufacturing companies, labor costs remain constant over wide ranges of output, so managers can consider labor as a fixed cost for many short-term output decisions. In addition, most overhead costs change only when managers decide to restructure the company, so these costs do not change as output fluctuates from day to day. The only cost that definitely does go up and down with production is the material cost. Hence, the cost of material will increase especially when economic downturn and the price of product will increase eventually. In spite of all, the product cost information was significantly more important when used directly in decision making. This may be because product cost information may be regarded as being more important when it is actually being used in a decision rather than as a guide for possible future decisions. Product cost information may be significantly more important in continuous production process manufacturing than in discrete-part and assembly manufacturing for product mix, output level and product discontinuation decisions because continuous production processes lead to the production of many different products for which a variety of product related decisions will need to be made. DISTRIBUTION(PLACEMENT) Placement under marketing mix involves all company activities that make the product available to the targeted customer, quoted by Kotler and Armstrong, 2004. With this, the easier the targeted customers can get the product, the more success of your company in distributing product. Distribution is getting your product to the consumer. Once you know your market area and have safely processed and packaged your product, you have to place it where your customer can buy it. On a general note, while planning placement strategy under marketing mix analysis, companies consider six different channel decisions including choosing between direct access to customers or involving middlemen, choosing single or multiple channels of distributions, the length of the distribution channel, the types of intermediaries, the numbers of distributors, and which intermediary to use based on the quality and reputation, quoted by Proctor, 2000. Therefore, distribution is important because it affects sales, profits and competitiveness. It can contribute up to fifty percent of the final selling price of some goods. Without distribution even the best product or service will fails. Author Jean-Jacques Lambin believes that a marketer has two roles which are organizing exchange through distribution and organizing communication. Moreover, distribution can be classified by channels, coverage, locations, transportation, logistics and others aspects. Physical distribution or Place must integrate with the other Ps in the marketing mix such as price, product and promotion. For example, the design of product packaging must fit onto a pallet, into a truck and onto a shelf, prices are often determined by distribution channels, and the image of the channel must fit in with the suppliers required positioning. You can see how Coca Cola further integrate the timing of distribution and promotion in the Hall Of Fame later. In fact, they see distribution as one of their core competencies. In addition, geographical pricing is setting different prices for a customer in different parts of the world which is includes shipping costs. Therefore, there will be difference price on the same product in differences country. Although within a country, the same product will be charged to different prices, which may be caused by the urban or metropolitan area, income distribution and others factors. Apart from that, distribution strategy is influenced by the market structure, the firms objectives, its resources and its overall marketing strategy. All these factors are addressed in the section on selecting Distribution Channels. The first strategic decision is distribution intensity which include of intensive, selective and exclusive distribution. Intensive distribution aims to provide saturation coverage of the market by using all available outlets. For many products, total sales are directly linked to the number of outlets used such as cigarettes and beer. Intensive distribution is usually required where customers have a range of acceptable brands to choose from. In other words, if one brand is not available, a customer will simply choose another. The second one is selective distribution which involves a producer using a limited number of outlets in a geographical area to sell products. The producer can choose the most appropriate or best-performing outlets and focus effort on them. Selective distribution works best when consumers are prepared to shop around or they have a preference for a particular brand or price and will search out the outlets that supply. The last one is exclusive distribution which is an extreme form of selective distribution in which only one wholesaler, retailer or distributor is used in a specific geographical area. The next strategic decision clarifies the number of levels within a channel such as agents, distributors, wholesalers, retailers, franchisees, direct marketing and others. In some Japanese markets there are many intermediaries involved. In the marketing channel of distribution in Japan, especially in the retail sector, the number of retailers had been increasing from 1950s to the beginning of 1980s consistently. However, it has begun to decrease in the beginning of 1980s, explained by Hisao Fujimoto. Companies such as Ford, Ferrari, Toyota, and Nissan use specific dealers to make their products available, whereas companies such as Nestle involve a whole chain of wholesaler retailers to reach its customers. In conclusion, distribution is playing a big role in the pricing decision. The business communities should place the product efficiently and effectively, and set a reasonable price for selling. There is some advice for the consumer, that is consumer should shop for the best price as they can find regardless of how long the levels of distribution and how far the place of selling the product from you. ECONOMIC CONDITION Economic environment of the country is an important factor affecting the pricing decisions. Inflationary and deflationary conditions will also affect the pricing decision of a company. Inflation is a rise in the average price level of goods and services in an economy over a period of time. Money loses purchasing power during inflationary periods since each unit of currency buys progressively fewer goods. Consequently, inflation also reflects erosion in the purchasing power of money which is a loss of real value in the internal medium of exchange and unit of account in the economy. Therefore, a company should decrease the price of product when there is an inflation so the consumer will be afford to buy it. On 20 July 1993, Alan Greespan, chairperson of the Board of Governors of the Federal Reserve System, testified before a congressional committee. He said: The role of expectations in the inflation process is crucial. Even expectations not validated by economic fundamentals can themselves add appreciably to wage and price pressures for a considerable period, potentially derailing the economy from its growth path. However, deflation is a decrease in average price level of goods and services in an economy over a period of time. While lower prices may seem ideal from a consumers point of view at first, but deflation leads to rising of unemployment and falling in production, a situation from which it is extremely difficult to recover. Therefore, a company should charge a higher price on product when selling it so that it can be able to pay for salary of employees and covered the production cost. On the other hand, the prices are increased in boom period to cover the increasing cost of production and distribution. To meet the changing economic conditions, several pricing decisions are available such as price can be boosted to protect profit against rising costs, price protection system can be linked with the price on delivery to current costs and emphasis can be shifted from sales volume to profit margin and cost reduction. On March 16 alone, five days after the earthquake and tsunami and as the nations nuclear crisis was worsening, United States investors put $700 million into Japanese Exchange Traded Funds, according to the data from Trim Tabs, an investment research organization. That was twice the previous largest daily inflow on record, in 2003. After the earthquake, investors waited for two trading days before acting. But on Wednesday, March 16, after stocks in Tokyo fell by about 10 percent, investors in the United States responded by moving heavily into E.T.F.s. One reason may be that Japanese stocks still have far to go in their recovery. Though the Nikkei 225 index in Tokyo has bounced back from recent lows, it is still down 9.43 percent since before the earthquake.

Anasazi :: essays research papers fc

Disappearance of the Anasazi civilization Summary The Anasazi civilization was a wonderment of there time. They were far ahead of any Indian civilization of that time era. They were cliff-dwelling people who where very knowledgeable in architecture, astronomy, and farming. They had built houses on the sides of cliffs that were more then 5 stories tall with plenty of space and even had religious meeting areas. They had a system for tracking the movement of the sun and the moon and also created a calendar that could track the summer and winter solstices and even the 19 year cycles of the moon. â€Å"..an astronomical refinement Europeans had not even achieved yet.† (Liberty Equality Power pg.31) The whole civilization disappeared off the face of the earth with hardly a trace. In the late 13th century the once growing civilization of he Ansazis disappeared. Many historians, anthropologists, and archeologists have come up with possible evidence of why or how the Anasazis disappeared. There are many possible theories that could explain their disappearance, but according to Olivia Leigh, author of â€Å"The mystery of the Anasazi", says that they fall into three basic categories â€Å"The drought theory, The conflict Notion, and the Alien connection.† The theory that an entire civilization was wiped out or forced to leave because of a severe drought is a possible connection. During 1100 A.D. there where many severe droughts that might cause the people to migrate to a new region, but without even taking there tools or even food? For no trace of them to be found after that they would have had to change there entire way of living. Appearance, religion, their culture, because no further traces of their civilization was found. â€Å"Current research suggests that the great drought was no where near as severe as scientists believed ten years ago, certainly not severe enough to drive a nation of people to abandon their homes.† (Leigh). Imagine a whole tribe being wiped out by warfare with an enemy, but the winning tribe leaving their spoils behind. The conflict notion implies just that a possible warring tribe could have attacked the Anasazi and killed off their entire population that was spread all over. There is no evidence of a battle that would be large enough to destroy such a large civilization and if so then why wouldn’t they steal or destroy the cities. Also, there hasn’t been any evidence of mass graves being uncovered or thousands of bodies even being found.

Essay --

Statement of Purpose Do you remember your very first day of school? I fixed the memory of this day in my mind which makes significant contribution in my education life. I run from my school that day due to have very mixed feeling about starting the journey of my education life. My grandmother gave me advice that hacked to my mind forever. She said everyone has her/his own universe, someone prefers to lead a life at dark universe while others not only do try to light their universe but also they make an effort to light the universe of other people. Getting knowledge and studying hard lead to achieving enlightenment. At that time, I thought that I should come back to school and study hard in order to light my universe and avoid being blind. By passing years, I understand the secret of my grandmother sentences. During high school I was one of outstanding students with the first rank at mathematical major. I chose industrial engineering for my bachelor degree because I believe this major would have helped me to increase my knowledge about different core areas of engineering and even management. Passing certain courses like project control, system analysis and planning, and dynamic systems analysis inspired me to transfer my information to industrial scope in order to find how theory have been applied to industrial scope. I worked as a trainee at several automotive firms and interacted with experts who had invaluable experiences which would be never taught at university. I thought my universe got light with learning expert’s experiences and their correlation with my courses in university. At the third summer of my bachelor, working as a trainee at the one of big and well-know companies in our country; provide me with golden oppor... ...try to light their universe† I should seek the research on my interest scope and persuade PHD level at system engineering specifically supply chain and operation research in order to improve my skills as a researcher and be accustomed with special problems and their solutions that are related to developed countries which would never happen if I wanted to continue my education at my own country. Choosing Gorge Mason University to reach my purposes is the first step of this long learning journey. Talking with Dr. Huang assured me this university pays utmost attention to the potential of research of students which is my favorite hobby. I believe that by coordinating with the eminent faculty of the department of system engineering like Dr. Huang, I will be able to light my dark universe a little more. Thank you for your time and consideration. Sincerely yours, Maryam

Causes of World War II Essay

Identify and explain at least two causes of World War II. Then analyze America’s foreign policy before the war, and describe how that policy changed as the war progressed. Be sure to include a discussion of how the Battle of Britain influenced American opinion. Make sure you use enough details to support your answer. Two causes of World War II were the harsh provisions of the Treaty of Versailles that ended World War I and the rise of nationalist leader Adolf Hitler. Treaty of Versailles – The new German government was required to surrender approximately 10 percent of its prewar territory in Europe and all of its overseas possessions. The harbor city of Danzig (now Gdansk) and the coal-rich Saarland were placed under the administration of the League of Nations, and France was allowed to exploit the economic resources of the Saarland until 1935. The German Army and Navy were limited in size. Kaiser Wilhelm II and a number of other high-ranking German officials were to be tried as war criminals. Under the terms of Article 231 of the treaty, the Germans accepted responsibility for the war and, as such, were liable to pay financial reparations to the Allies, though the actual amount would be determined by an Inter-Allied Commission that would present its findings in. Germans would grow to resent these harsh conditions imposed by the Treaty of Versailles. Adolf Hitler – a charismatic leader who rose to power in Germany during intra-war period. German supported him because they needed a strong leader. He promised higher prices for farmers, jobs for unemployed workers, profits for small businesses and an end to the communist threat for large industrialists. After a year in office, Hitler began a compaign to revise the Versailles Treaty. He declared himself the Third Reich. He withdrew Germany from the League of Nations, renounced the Versailles Treaty and re-armed Germany. Hitler annexed Austria and threatened Poland. Germany invaded Poland and World War II began. The American public was decidedly isolationist and antiwar. When France fell to the Nazis in May 1940, Britain stood alone. Roosevelt began a remarkable and voluminous secret.

Pop Culture’s Influence on Dating Essay

What’s the best part about dating? The rush of getting to know a new person? The hope that it will lead to something more lasting? For some people it’s the dream to find their true love and have them sweep them off their feet. For others it’s finding a person who doesn’t mind a more casual relationship. Most of the time, they return home only to think about what might have happened if their life went as well as the scripted ones they watch all of the time. They wish that they had a team of writers planning the next move in their romantic lives, and had award winning actors take on their role in life. These people have become victims of the modern age in dating. Be it movies, television, or books, pop culture has helped men and women set unrealistic expectations for dating and romance. We all know that the silver screen puts the rose-colored glasses over romance, but it is how they portray dating in many different genres that is really skewed. Horror movies are expected to end badly, and it is no exception for dating in this movie style. Typically the young couple are terrorized on a date by some knife-wielding maniac out for revenge. That can lead to many assumptions, depending on how the movie ended. If the couple was killed during the course of the film, then it can be concluded that the good die young. But if they both survive (and there isn’t a sequel haunting them) then people may start to believe that true love is formed by going through a traumatic experience with someone. Often times in Horror films, the couple goes out to get some privacy, only to find themselves the killer’s first victims. Not many people get the wrong idea about dating from Horror movies, granted, but what about the plucky love interest for everyone’s favorite Superheros? Mary Jane Watson, Gwen Stacy, Pepper Potts, Peggy Carter, Lois Lane, and Jane Foster to name a few. These women have made a name for themselves by being charmed by Superheros. Their men (Spiderman, Iron Man, Captain America, Superman, and Thor, respectively) are either super strong, super smart, an alien, or any combination of the three. If that d oesn’t give people the wrong idea about romance, then the writers aren’t doing their job. The strong, but constantly endangered, women are intelligent and attractive, leading the â€Å"hero† in the audience to long for the power to fly in and save them from any and all perilous situations. With people wanting a hero, and heroes waiting for their fem fatal, no one is going to make it out of this dating game alive. Superpowers aside, perhaps the most disillusioning movie genre is the Romantic Comedy. Quirky but lovable characters are thrust together in strange situations and they always come out of it with the love of their life. This genre has capitalized on the nice-guy finally getting the girl, the best friends realizing that they were made for each other, and fairy tale endings that warm the audience’s hearts. Men and women alike are fans of the Romantic Comedy, in part because they’re designed that way; the actresses are all attractive or funny, the actors are both, and the script is written for both men and women. Whether or not they admit to it, everyone enjoys a good â€Å"rom-com† after a long day of disappointment, and why not? The protagonist always comes out on top, and there’s always that one great date following all of the duds. For as long as they’ve been around, movies have helped the public set impossible goals for dating, but then television came along and sped up the process. From play dates to wedding dates, television has given a â€Å"Step-by-Step† guide to dating, particularly in shows such as Boy Meets World, Friends, and How I Met Your Mother. In Boy Meets World the viewers watched as Cory Matthews grew up, fell in love, and lived his life. Cory’s â€Å"love-of-his-life† was Tapanga Lawrence, a girl that he started calling his wife in Pre-School. Their relationship went through rough patches, but someone always knew that it was meant to be. The idea that one can meet (and keep) their first love from their childhood days is almost as improbable as thinking that Superheros can swoop in and save the day. Against all odds Cory and Tapanga actually survive dating through High School, and marriage in College. Young children are taught through weekly episodes that true love can be found on the playground, and that while it is imperfect, it is eternal. Boy Meets World was a family oriented show, but what about the shows that were geared more towards the working adult? Friends was a television sitcom that followed the lives of six friends. Viewers watched as their favorite friend fell in and out of love. Rachel and Ross had an on-again, off-again relationship that confused everyone, including the actors. Their relationship was based on attraction but the way they treated each other was, at times, cruel. This couple was volatile at best, and a running joke for viewers; â€Å"Are Ross and Rachel together this week?† Another couple in the show occurred later on in the series, and provides a foil to Ross and Rachel. Chandler and Monica’s relationship was built on friendship and as such was more stable. They were the fun couple who’s lines were joking and who always put the other first. The show was casual with its approach to dating, with non-regular characters coming and going throughout the series. Other shows were not as simple. Soap Operas fall in line with the over-dramatization of romance and dating, and there are many shows that focus on finding love. How I Met Your Mother is literally the drawn out retelling of how Ted Mosby found the mother of his children. These shows, while entertaining and sometimes informative, tell men and women that their true love can be found in everyday places such as work, at a coffee shop, or even on the playground. Television is guilty of helping with today’s dating misconceptions, however the biggest offender is literature by far. â€Å"Bodice Rippers† may not be the only things leading to unrealistic ideas about love; everything from Shakespeare to the Teen Romance section in today’s book stores share some of the blame. Romeo and Juliet is perhaps the most well-known romance story of all time. The main characters are teenagers who pledge their love to each other, despite being from warring families. They kill themselves for love that they think is forever but, historically had they lived and been allowed to marry, one of the lovers would have had an affair or died of natural causes early on in their marriage. Poetry of that time was romantic and well written as well. It really is a pit y that most of those poems were written about love affairs with already married people. They spoke of undeniable attraction, and how they really shouldn’t be denying themselves the love of the other person. Romance novels from later centuries tell readers about an odd sensation of love-at-first-sight. â€Å"Our eyes met, and I knew right then and there that we were meant to be together forever.† This idea is the drug of romance novels, it is what gets readers hooked and coming back for more. People have spent countless hours pouring over books with lines like that acting as major plot devices. Most readers swoon over the muscled heroes, dreaming of being in the heroine’s place. Teen Romance novels take this idea and make it even more impossible. They write in supernatural beings for the awkward teenager to fall in love with. Even if they take away the fantasy element, at heart the stories are improbable. For the most part, teenagers in High School don’t know what romantic love is (or if they do, it is never forever). Teen Romance novels teach teenagers that the love of their life is waiting for them in their Biology class, is the partner on a History assignment, or is the loner who they see in the library everyday. Teenagers who read these books get the idea that they can find a true love in the hormone-ridden home of disappointment that is High School. Escaping the real world by reading isn’t bad, but letting the fiction influence the thought process never ended well for anyone. Pop culture isn’t inherently evil, but when it comes to dating and romance, it is probably best to stop drawing parallels with real life. Movies, books, and literature are supposed to be used as ways to escape reality, not as guidelines for how to live. It would be a little ridiculous to put disclaimers before movies, shows, and books reading â€Å"Warning: Relationships portrayed in this are fictional, and not based on real life† but it’s starting to feel necessary. Not every story has a happy ending, and even those who do aren’t forever. If the public could just learn to stop accepting pop culture as gospel, stop looking for their soul mate where they â€Å"never would have expected†, then the dating world would be a better place. A place where true love doesn’t mean a love against all odds, but a love that is real. Real love is when a couple can get into arguments, be mad at each other and that isn’t the end of the relationship; when it isn’t all rainbows and roses but they’re happy with each other. No one wants to watch a movie about that, but then again, no one wants to watch a baby being born and they film â€Å"the miracle of life† every day. Maybe if more movies, TV shows, and books were realistic, more people would enjoy dating.

Individuation Process Essay

* Individuation process the process of beeing aware of oneself and the way to discover one’s true, inner self. * According to jung:The ego. This is the conscious mind. * The personal unconscious. This includes forgotten or suppressed memories from our own personal lives. * The collective unconscious. This is shared by all people. It is the collective memory of human thought and experience, from ancient to modern times. This includes the basic human instincts and the archetypes. * The Self is that what we are in essence. In psychological terms, it includes the conscious, the unconscious, and the ego. The Self is the central archetype in the collective unconscious, Archetypes The collective unconscious is shared by us all. This means that it is present in each of us, a vast reservoir of the archetypes of the whole of humanity. It is accessible to everyone. The collective unconscious consists of characteristics that many people have in common and which each of us inherit at birth. The content of the archetype is basically unconscious. It undergoes a transformation when it becomes conscious or when it is being perceived. An archetype is experienced as image and as emotion. It is especially recognizable in such typical and important human situations as birth and death, adolescence, extreme fear or a fearful experience. During such life phases and experiences archetypes will often appear clearly in dreams Archetypes cannot be brushed aside. They will always manifest. Individuation Individuation means that one becomes a person, an individual, a totally integrated personality. It is a process of self realization during which one integrates those contents of the psyche that have the ability to become conscious. It is a search for totality. It is an experience that could be formulated as the discovery of the divine in yourself, or the discovery of the totality of your Self. This does not always happen without pain, but it is necessary to accept many things that normally we would shy away from. Once a person has accepted the contents of his unconsciousness and has reached the goal of the individuation process, he is conscious of his relationships with everything that lives, with the entire cosmos. The individuation process begins with becoming conscious of the Persona, the mask we take on in our every day life. After this we become conscious of the Shadow, the repressed characteristics of the ego. Then we become conscious of the Anima, the inner woman in each man, or the Animus, the inner man in each woman. Then the image of the old wise man, or the old wise mother appears, after which the experience of the Self happens. The shadows The Shadow is all those uncivilized desires and emotions that are incompatible with the norms of society and with our ideal personality. It is all we are ashamed of, that we do not wish to be. when confronted with yhe shadow we feel guilt and shame for the parts of ourselves which we keek hidden. The Anima is the female aspect present in every man. Another anima trick is pseudo-intellectual dialogs which prevents a man from feeling life closely and coming to real decisions. He thinks so much about life that he cannot live, and he losses all spontaneity and the flow of life. The dark aspect will most likely appear when a man has suppressed or underestimated his female nature, treating women with contempt or carelessness. The Animus The animus in women is the counterpart of the anima in men. Like the anima, the animus has three roots: the collective image of a man that a woman acquires, her own experiences with men in her life, and the latent male principle in herself. The Old Wise Man The old wise man appears in the form of king, hero, medicine man, savior, magician, saint, ruler over man and spirits, God’s closest friend and so on. This archetype is a real danger for the personality, because once it has been aroused, a man can easily believe that he possesses ‘mana’, real magical power, and wisdom. He who is possessed by this archetype believes he is gifted with great (maybe esoteric) wisdom, prophetic gifts, the ability to heal and so on. Such a man can gather followers, as he has entered the unconscious way further than anybody else. The archetype has a fascinating power, intuitively felt by people and not easily resisted. They are fascinated by what he is saying, but after analysis it is often not intelligent. The power of the old wise man can be destructive as it forces a man to act above his power and capacity. He does not posses the wisdom he claims. In reality it is the voice of the unconscious that should be subjected to criticism and analysis. The Great Mother In a woman the archetype of the great mother acts in a similar way to the old wise man in a man. Any woman possessed by this archetype, believes that she is gifted with an unlimited capacity to love and to understand, to help and to protect, and she will exhaust herself in service to others. The archetype can be destructive when the woman is fixated on the belief that anybody within her sphere of influence are ‘her children† and therefore they are helpless or dependent on her.

A Votre Sante Teaching Note Essay Example for Free

A Votre Sante Teaching Note Essay ? Additionally, the case questions require both quantitative and qualitative analyses of the business issues faced by AVS. AVS has been used in a graduate-level managerial accounting class for MBAs, and would be most appropriate for an advanced undergraduate or a graduate-level accounting or MBA course. The detail in the case is rich enough to support a variety of analyses. Alternative uses could be to have the student construct a cost of goods manufactured statement or a traditional financial statement, both of which reinforce the differences between product and period costs. Additionally, alternative decision analysis questions could be developed using the variable and fixed cost structures described in the case. Case question number two is only one example of a potential decision analysis question. The contribution margin income statement (Teaching Note Exhibit 1) is fairly straightforward, with the following concepts or calculations causing the most difficulty: The inclusion of liquor taxes and sales commissions in variable costs: These are both period expenses, but are clearly based upon the number of bottles sold, and therefore are included in the variable costs. Where to include the wine master expense: Since the wine master is paid according to number of blends, not number of bottles, this expense is listed as a fixed cost. Arguably, it could be listed as a variable cost, given that the cost will be based on the number of wines produced. As part of the discussion we will examine the rationale behind listing wine master as a fixed or a variable expense. Barrel expense: The case states that the barrels produce the equivalent of 40 cases of wine. A case of wine is post-fermentation/bottling and therefore after the 10% loss has occurred. The barrels contain the wine at the start of the process. Therefore, there have to be enough barrels to hold all the wine at the beginning of the process, not at the end. This factor results in 63 (62.5) barrels being required for the harvest2. Teaching Note Exhibit 1: Contribution Margin Income Statement Part b asks, â€Å"What is the maximum amount that AVS would pay to buy an additional pound of Chardonnay grapes?† There are three parts to calculating this answer: the benefit from the additional Chardonnay wine to be sold, the relevant costs related to producing this wine and the opportunity cost of not producing as much Blanc de Blanc wine. Teaching Note: Exhibit 2 displays the calculations relevant to this decision. Chardonnay regular wine requires a 2 to 1 mixture of Chardonnay and generic white grapes. Therefore, the 18,000 pounds of Chardonnay grapes will be combined with 9,000 pounds of generic white grapes. The 27,000 pounds of grapes will result in an additional 9,000 bottles of new Chardonnay regular wine being produced. However, it will also result in a 3,000-bottle decrease in the amount of Blanc de Blanc wine produced, since some generic grapes will now be used for the Chardonnay-regular wine. Recall that only Chardonnay wine is processed in barrels. A Votre Sante Teaching Note. (2016, May 31).