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Determine the average cost per gallon

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Question - 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.

Reference no: EM131912586

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