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  3. a company produces numerous blends of coffee, two

A company produces numerous blends of coffee, two of which are known as the French...

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Accounting

A company produces numerous blends of coffee, two of which are known as the French Blend and the Italian Blend. The companys ABC system divides its total manufacturing overhead of $1,982,500 into four activity cost pools as shown below.

Activity Activity Measure Expected Activity Estimated Cost
Purchasing Purchase orders 1,500 orders $ 330,000
Materials handling Number of setups 1,800 setups $ 540,000
Quality control Number of batches 600 batches $ 210,000
Roasting Roasting hours 95,000 hours $ 902,500

Data regarding production of the French and Italian blends is as follows:

French Blend Italian Blend
Expected sales 100,000 pounds 7,000 pounds
Batch size 10,000 pounds 1,250 pounds
Setups 3 per batch 3 per batch
Purchase order size 20,000 pounds 200 pounds
Roasting time per 100 pounds 0.5 hours 0.5 hours

Assume the company uses activity-based costing. How much overhead cost would be assigned from the Purchasing activity to the Italian Blend based on its expected sales?

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