Evaluate the average cost per gallon

Assignment Help Cost Accounting

Reference no: EM133532

Question :

Dino's Castillo works in a wine outlet in San Juan. 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 Castillo has capability of 800 gallon per day.

Required:

a. Evaluate the average cost per gallon.

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

c. A bus loaded with 40 tourist's stops by ending time and the tour director offers Dino's Castillo $450 for 40 gallons. Dino's Castillo refuses, saying they may lose $3.75 on each gallon. Is Castillo Del Morro correct about the $3.75? Why or why not? Describe with calculations. Should they accept the offer?

d. A fund - raising organization has provided Dino's Castillo a one-year contract to purchase 300 gallons a day for $10.75 each. Should they accept the offer? Why or why not? Describe with calculations.

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

Reference no: EM133532

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