Inventory and Costs
IIM Lucknow, Noida Campus
MANAGEMENT ACCOUNTING –II
Assignment – II, Daniel Dobbins Distillery, Inc (Case Analysis)
Submitted By:
Rahul Srivastava (WMP08034)
Vinay Joshi (WMP08045)
ANALYSIS
Company History * Founded in 1880 in Oakwoods by Daniel Dobbins. * Major product is Old Trailridge Bourbon Whisky * High quality of whisky due to the unusual iron-free spring water used in the distillation process and the specially prepared fire-charred white oak barrels used in the aging process. * David Dobbins takes over in 1973. * Constant demand over the years * High demand surge forecasted due to maturity of Baby boom generation.
Manufacturing Process * Ingredients controlled by laws. * Barrels can be used only once * Barrels are made through a patented process * Whisky has to mature for at least 4 years after the process. * Stored in 50 gallon barrels for mellowing in warehouse
Maturing or Aging Process
* The 50-gallon barrels manufactured under a unique patented process at acost of more than $60 per barrel. The barrels could not be reused foraging future batches of bourbon whiskey but could be sold to used barrel dealers for $1 each at the end of the aging period. * The increased production in 1988 necessitated the leasing of an additional warehouse at an annual rental cost of $200,000. The temperature and humidity of the warehouse space had to be controlled since the quality of the whiskey could be ruined by its aging too fast or too slowly. * A small amount of liquid was removed from representative barrels at this time and sent to the sampling laboratory for quality inspection (usually performed by skilled tasters). If the quality of the whiskey was not up to standard, certain measures were taken, such as adjusting the aging process, to bring it up to standard. * At this time, each barrel was also checked for leaks or seepage, and the required repairs were made. * On the average,
MANAGEMENT ACCOUNTING –II
Assignment – II, Daniel Dobbins Distillery, Inc (Case Analysis)
Submitted By:
Rahul Srivastava (WMP08034)
Vinay Joshi (WMP08045)
ANALYSIS
Company History * Founded in 1880 in Oakwoods by Daniel Dobbins. * Major product is Old Trailridge Bourbon Whisky * High quality of whisky due to the unusual iron-free spring water used in the distillation process and the specially prepared fire-charred white oak barrels used in the aging process. * David Dobbins takes over in 1973. * Constant demand over the years * High demand surge forecasted due to maturity of Baby boom generation.
Manufacturing Process * Ingredients controlled by laws. * Barrels can be used only once * Barrels are made through a patented process * Whisky has to mature for at least 4 years after the process. * Stored in 50 gallon barrels for mellowing in warehouse
Maturing or Aging Process
* The 50-gallon barrels manufactured under a unique patented process at acost of more than $60 per barrel. The barrels could not be reused foraging future batches of bourbon whiskey but could be sold to used barrel dealers for $1 each at the end of the aging period. * The increased production in 1988 necessitated the leasing of an additional warehouse at an annual rental cost of $200,000. The temperature and humidity of the warehouse space had to be controlled since the quality of the whiskey could be ruined by its aging too fast or too slowly. * A small amount of liquid was removed from representative barrels at this time and sent to the sampling laboratory for quality inspection (usually performed by skilled tasters). If the quality of the whiskey was not up to standard, certain measures were taken, such as adjusting the aging process, to bring it up to standard. * At this time, each barrel was also checked for leaks or seepage, and the required repairs were made. * On the average,