An Activity-Based Costing of Wine

Abstract

Recent changes in wine consumption have given rise to an evolution in production processes that render useless traditional cost systems. In order to face the complexity and variety of the winemaking process, we propose to use an adapted Activity-Based Costing (ABC) system for the cost calculation of winemaking. This system gets valuable information about winemaking costs to assist winery managers in improving their business competitiveness.

Notes

1. Worldwide wine production and consumption statistics can be consulted at Organisation Internationale De La Vigne Et Du Vin (OIV) (http://www.oiv.org/).

2. For example, the most recent by Hirschfelt et al. (2000), Wilbur et al. (2002), Ball and Folwell (2003), Weber et al. (2003, 2005), Ball et al. (2004), Smith et al. (2004a, 2004b), Marcum et al. (2005), Peacock et al. (2005) and Verdegaal et al. (2005).

3. After racking, red wines are usually aged in oak barrels. As this paper deals with young wines, we have omitted this step.

4. Stabilization and clarification are also common processes, but they will be considered in the complementary winemaking process.

5. Stabilization and clarification are also common processes, which will be considered in the complementary winemaking process.

6. Thus, for fermentation activities, the number of days' duration of the activity is very important, since it is directly related to man-hour control costs.

7. Please contact the authors if you are interested in a spreadsheet with the fully adapted ABC model.

8. Folwell and Castaldi (1988) found that an increment of 50% in the price of the grape increases the total cost of wine by around 17%.

Additional information

Notes on contributors

José Ignacio González-Gómez

José Ignacio González-Gómez, Department of Financial Economics and Accountancy, University of La Laguna, Campus de Guajara s/n, 38200, Spain (E-mail: [email protected]).