A Votre Sante

IMA EDUCATIONAL Case Jou rnal

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Case Study

The Association for Accountants and Financial Professionals in Business

ISSN 1940-204X

A Votre Sante: Product Costing and Decision Analysis in the Wine Industry

Prisc'illtt S. Wis11er University of Ten11essee

BACKGROUND

The Aproveche famil y owns and operates a small independem winery located in the Napa Valley California American Viticultural Area (AVA).'

of$H48,000 (see Exhibit 1). Kay was concerned that the 2010 profit margin had declined from the 2009 profit margin of 14%, despite a small increase in sales volume.

AVorre Sante (AVS), which means

WINEMAKING PROCESS

The process of wine making is fairl y simple, ye t requires much attention to process details. 1Iarvest takes place in the late s ummer and early fall months; typically, the time elapsed from harves t to final sale is about 11 months. After harvest , the grapes arc brou g ht to the winery for washing and crushing. The crushing process separates the juice from the pulp, skin, and stems. The juice is used to make the wine; the pulp, skin, and sterns are recycled back onto the fields whenever poss ible or di sposed of The amount of grapes avai.lablc for harvest and the amount of juice generated from th e grapes is dependent each year on a number of climatic and growing factors such as temperature, len gth of growing season , rootstock, and fertilizers used . Once the juice is extracted, it moves into the fermenting process. The Chardonnay wine grape is fermented using oak barrel s; the oak in the barre ls gives flavor to the Chardonn ay wine. The generic white grape juices are fermented in a steel hold ing ta nk rather than in barrels. All fermenting takes place in a temperature-controlled environment; however, each fermenting method resu lts in some wine loss throu gh evaporation.

"to yo ur health" in French, enjoys a reputation for producing

sma ll amounts of quality wines. AVS was started by Je rome Aproveche in 2005 as an...