A Votre Sante Teaching Note Essay

Custom Student Mr. Teacher ENG 1001-04 31 May 2016

A Votre Sante Teaching Note

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, “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.

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  • University/College: University of Chicago

  • Type of paper: Thesis/Dissertation Chapter

  • Date: 31 May 2016

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