« on: February 03, 2013, 10:40:49 PM »
I've read a lot of business plans for breweries over the last few years. I've noticed that all of them use a volume-based overhead rate, usually the number of barrels brewed. For a manufacturer like a brewer, who has a lot of overhead, but relatively little direct material or labor costs, using production volume to determine applied overhead will distort the cost of your products.
The main cost-driver in a brewery is the brewery itself and the equipment, not the labor or materials used.
I guess that makes intuitive sense, because you're paying for that brewery and that fermentor every day, whether it has beer in it or not. So the 21-day beer costs you a lot more to make than the 10-day beer.
I made a very simple spreadsheet to project the number of brews per month, assuming 4 fermentors, 4 beers, and only brewing on the weekdays.
(These are very rough figures, with some rounding, just to show how fermentation time affects cost per barrel in an activity (time) based costing system)
Fermentation time, # of batches per month
Blonde 10 days, 3
IPA 14 days, 2.2
Weiss 10 days, 2.7
Tripel 21 days, 1.4
4 days unused
Direct materials cost per bbl:
Overhead per month:
Total overhead = $6000
BBL per month = 93
4 FV * 30 days = 120
Cost per barrel (OH + direct materials) w/volume-based overhead
OH = $64.52 per barrel
Cost per barrel w/time-based overhead
OH = $50 per day, per fermentor
Cost of unused capacity (4 days) - $200
Why does any of this matter? If you can get your cost per barrel down on the blonde and weiss, you can lower the selling price, making it more competitive, and perhaps selling more.
This will also show you if you should be charging more for the tripel, or other beers that take a long time to brew.