In September 2008. Patricia Quintana, majority shareholder and Chief Executive Officer of Northern Naps Valley Winery Inc. (‘Northern’), was considering an offer from TransContinental Stores whereby TransContinental would purchase all of Northerns excess grapes from the 2008 harvest. Before deciding what quantity Northern had available for sale. Ms. Quintana had to decide how much of this year’s harvest should be retained for production of Northern’s own brand of red table wine.

THE COMPANY

Northern Napa Valley Winery was one of the older wineries in the Napa Valley of California. Northern produced a number of different specialty wines and had established a reputation by carefully producing quite small quantities of several good but moderately priced labels.

Unfortunately, these quality wines did not generate sufficient revenues to enable Northern to survive financially and so. in the late 1960s. Northern began producing and marketing a red table wine aimed at the low price sector of the market. Sales of this wine had grown steadily (Exhibit 1) and had become an important factor in maintaining the profitability of the winery.

Originally, red table wine had been made from a blend of grape juice that was surplus to Northern’s specialty wine production and some purchased juice. But the success of this product had led to the planting of vines to produce grapes specifically destined for the red table wine. In recent years, Northern had had excess grape juice to dispose of after production of red table wine, but there had been a problem in selling the excess juice to a company, such as TransContinential, for retail sale as grape juice or for conversion into their own house-brand red wine.

THE ISSUE

In order to decide how much juice was available for sale to TransContinental (or any other possible buyer), Ms. Quintana had to decide the number of