Ask Question
4 May, 14:01

La Jolla Beverage Products is considering producing a wine cooler that would be a blend of a white wine, a rose wine, and fruit juice. To meet taste specifications, the wine cooler must consist of at least 50% white wine, at least 20% and no more than 30% rose, and exactly 20% fruit juice. La Jolla purchases the wine from local wineries and the fruit juice from a processing plant in San Francisco. For the current production period, 9000 gallons of white wine and 7500 gallons of rose wine can be purchased; an unlimited amount of fruit juice can be ordered. The costs for the wine are $1 per gallon for the white and $1.5 per gallon for the rose; the fruit juice can be purchased for $0.5 per gallon. La Jolla Beverage Products can sell all of the wine cooler it can produce for $3 per gallon. Is the cost of the wine and fruit juice a sunk cost or a relevant cost in this situation?

+4
Answers (1)
  1. 4 May, 16:13
    0
    Answer: A relevant cost are those that differ in total between the options are relevant to a decision. If a cost will be the same regardless of the option selected, the decision has no effect on the cost and can be ignored.

    The cost of wine and fruit juice is a relevant cost because it is subject to a future decision on the mixing percentages that La Jolla will choose and will be incremental because the more they want to produce, the more the cost will increase.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “La Jolla Beverage Products is considering producing a wine cooler that would be a blend of a white wine, a rose wine, and fruit juice. To ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers