Question

In: Accounting

Question 1: Consider the following revenue and cost data for Shannon’s Brewery in Keller, Texas. Shannon’s...

Question 1:

Consider the following revenue and cost data for Shannon’s Brewery in Keller, Texas. Shannon’s sells 35% of its craft beer production through its own on-premise taproom. The bulk of its sales (65%) are made off-premise via various retail outlets including supermarkets, bars, and restaurants. 40% of its of sales (on-premise and off-premise) consists of package sales (bottles and cans). Of this 40%, beer sold in cans accounts for 80% with sales of bottled beer accounting for the remaining 20%. Finally, the bulk of Shannon’s craft beer sales (60%) occurs in kegs (31 gallons per keg). Assume that overall sales for FY 2018 are expected to be $1,278,360. Given the proportions of beer sold in kegs, bottles, and cans, what will be the predicted dollar sales of beer sold in kegs? Round your answer to the nearest one dollar.

Question 2:

Assume the following costs in each of the categories identified in question one are:

Packaged (Cans & Bottles)

$160,206

Kegs

$67,098

Shrinkage/WIP Loss

$42,000

Contract Labor

$9,000

Direct Labor

$240,000

Freight

$18,000

Consumer Advertising

$30,000

Trade Promotion

$30,000

Sales Promotion

$18,000

Salaries & Benefits

$180,000

What is Shannon's cost of goods sold?

Question 3:

Assume that projected revenue for 2018 is 1,155,212. Also assume the following projected 2018 costs in each of the cost categories from question one:

Packaged (Cans & Bottles)

$156,846

Kegs

$71,684

Shrinkage/WIP Loss

$42,000

Contract Labor

$9,000

Direct Labor

$240,000

Freight

$18,000

Consumer Advertising

$30,000

Trade Promotion

$30,000

Sales Promotion

$18,000

Salaries & Benefits

$180,000

Given these costs, compute Shannon’s projected contribution in dollars.

Solutions

Expert Solution

1)

The following breakdowns can be obtained from the question:

Sales through own on-premise taproom = 35%

Sales made off-premise = 65%

Package sales of bottles and cans via on-premise and off-premise = 40% of total sales (i.e. of 100%)

Beer sold in kegs = 60% of total sales (i.e. of 100%)

Beer sold in cans = 80% of 40% of total

Bottled beer sold = 20% of 40% of total

Expected overall sales for FY 2018 = $1,278,360

From the breakdown above, the predicted dollar sales of beer sold in kegs can be calculated as follows:

Predicted amount of beer sold in kegs = 60% × $1,278,360 = $767,016

2)

Computation of Cost of Goods Sold:    

Particular                                   Amount

Packaged (Cans & Bottles)      $160206

Kegs                                          $67098

Work In Progress Loss             $42,000

Contract Labor                         $9,000

Direct Labor                             $240,000

Freight                                      $18,000    

Cost of Goods Sold $536304

Note: All of these are not included in Cost of good sold

Consumer Advertising   $30,000

Trade Promotion            $30,000

Sales Promotion            $18,000

Salaries & Benefits         $180,000

3) Contribution = Sales - COGS

SALES = 1155212

COGS =

Packaged (Cans & Bottles)

$156,846

Kegs

$71,684

Shrinkage/WIP Loss

$42,000

Contract Labor

$9,000

Direct Labor

$240,000

Freight

$18,000

= $537530

Contribution = 1155212 - 537530 = $617682


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