Analysis of Daniel Dobbins Distillery Inc. Case
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Analysis of Daniel Dobbins Distillery Inc. Circumstance.
Title: Research of Daniel Dobbins Distillery Inc. Case.
Because of the market forecast that the require of direct whiskey will be doubled via 1987 to 1995, the board of Daniel Dobbins Whiskey Inc decided to increase the production of whiskey in 1988 by 50 percent of the 1987 volume in order to meet the predicted increase in buyer demand via 1991 through 1995. The manufacturing procedure for whiskey can be divided into two stages. Beneath the first stage which includes several different measures, raw materials will be converted into a clear liquid using a sharp, gnawing at taste. The 2nd stage which called вЂMaturing or Aging Process' involves maturing or perhaps aging a minimum of four years under manipulated temperature and humidity circumstances. Because of the embrace cost of creation in 1988, that will generate profits only in 1991, the profits statement of Daniel Dobbins Inc showed a net loss of $814000 which was an important change from net profit of $1504000 in 1987. To get loan of $3 , 000, 000 from Ridgeview National Bank of Nashville, the point of consideration to get COO of Daniel Dobbins Distillery is definitely how to present the financial results of 1988 to the bank. This kind of loan is crucial for firm to remain solvent. One of the key issues in such a case is the right way to divide the increased costs in 1988 among вЂInventoriable costs' and вЂPeriod costs'. In line with the case, whilst preparing the income assertion in 1988, the expense of initial stage was included below inventoriable costs and costs of second stage was included beneath Period costs which ended in net loss in 1988. Increase in cost of production in second stage can be attributed to pursuing increase in costs under second stage of manufacturing. a) Improved costs due to increase in the...