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Introduction

_ In 1993 it had $18.3 m sales and a net

loss of $700,000
_ Bill Evanson and Sam Davis decide to
do value analysis for 1991 Cimarron
Meritage White
_ In 1991 Cimarron winery sold 37,205
cases for $2.7 m sales
Meritage White
_ Sales Price per case $76
_ Product Costs per case $52.73
Grapes ($13.26)
Winemaking ($21.07)
Bottling ($16.80)
Bottle Aging ($1.60)
_ Grapes are direct cost
_ The other costs in proportion to volume
processed
Winery Costs

_ Divided into three stages

_ Stage 1(crushing, pressing and
fermenting)
_ Stage 2(fining, filtering and bulk aging)
_ Stage 3(preparation for bottling)
 ABC Costing - Winemaking
s"
| " '
 ##"
% "
## ## | " |"
"
%(Crushing,
Pressing, 18% of wine made in
Fermenting 272,300 268,000 49,014 1991
18% of wine made in
Barrel Depreciation 12,700 2,286 1991
"
%( Firing, Filtering, 15% of stage 2 costs in
Bulk Aging 571,000 404,100 60,615 1992
15% of stage 2 costs in
Barrel Depreciation 154,900 23,235 1992
"
%)( Preparation for 28% of wine prepared
Bottling 57,000 56,000 15,680 in 1992
Total 913,000 883,000 150,830 5,575 Cases

%| " 27.05 Per Case
*
+
" 4.58 Per Case
 Meritage White Costs

$
%| "% *|| "%

! "| " s"
, |
,
Grapes 73,901 13.26 13.26
Wine Making 117,486 21.07 27.05
Bottling 93,657 16.80 13.92
Bottle Aging 8,937 1.60 1.60

Total 293,981 52.73 55.83

Òues2: Overall Value

_ See Excel File

Overall Value Chain

Òues3: Business Issues

_ Correct cost apportioning is critical

Average costing is not appropriate
ABC approach is better
_ CWG is subsidizing other parts of the
value chain
Òues4: Inferences from Lyford

_ Each component of the value chain

has to be efficient
_ Components in the value chain have to
support each other not subsidize
Òues5: Advice

_ The vineyard is overcharging

_ CWG should consider their own vineyard
_ Winemaking is being under costed and the
price of Meritage white should be increased
_ Proper costing of all wines
_ Complete value chain analysis of all wines
Thank You