Clearwater Company Operates a Wine Outlet in a Tourist Area

Essay

Clearwater Company operates a wine outlet in a tourist area. One litre bottles sell for $12. Daily fixed costs are $3,000, and variable costs are $6 per litre. An average of 750 litres are sold each day. Clearwater has a capacity of 800 litres per day.
Required:
a. Determine the average cost per bottle.
b. A bus loaded with 40 senior citizens stops by at closing time and the tour director offers Clearwater $300 for 40 litres. Clearwater refuses, saying they would lose $2.50 on each litre. Is Clearwater correct about the $2.50? Why or why not?
c. A fund-raising organization has offered Clearwater a one-year contract to buy 300 litres a day for $7.50 each. Should they accept the offer? Why or why not?