Coffee Bean Inc. (CBI) processes and distributes a variety of coffee. CBI buys coffee beans from...

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Coffee Bean Inc. (CBI) processes and distributes a variety ofcoffee. CBI buys coffee beans from around the world and roasts,blends, and packages them for resale. Currently, the firm offers 15coffees to gourmet shops in 1-pound bags. The major cost is directmaterials; however, a substantial amount of factory overhead isincurred in the predominantly automated roasting and packingprocess. The company uses relatively little direct labor. Some ofthe coffees are very popular and sell in large volumes; a few ofthe newer brands have very low volumes. CBI prices its coffee atfull product cost, including allocated overhead, plus a markup of30%. If its prices for certain coffees are significantly higherthan the market, CBI lowers its prices. The company competesprimarily on the quality of its products, but customers are priceconscious as well. Data for the current budget include factoryoverhead of $2,300,000, which has been allocated on the basis ofeach product’s direct labor cost. The budgeted direct labor costfor the current year totals $593,000. The firm budgeted $5,300,000for purchase and use of direct materials (mostly coffee beans). Thebudgeted direct costs for 1-pound bags of two of the company’s manyproducts are as follows:
Mona Loa Malaysian Direct materials $ 4.20 $ 3.20 Direct labor0.30 0.30
CBI’s controller, Mona Clin, believes that its current productcosting system could be providing misleading cost information. Shehas developed this analysis of the current year’s budgeted factoryoverhead costs:
Activity Cost Driver Budgeted Activity Budgeted Cost PurchasingPurchase orders 1,088 $ 572,000 Materials handling Setups 1,730713,000 Quality control Batches 650 137,000 Roasting Roasting hours95,400 954,000 Blending Blending hours 32,900 329,000 PackagingPackaging hours 25,300 253,000 Total factory overhead cost $2,958,000
Data regarding the current year’s production of just two of itslines, Mona Loa and Malaysian, follow. There is no beginning orending direct materials inventory for either of these coffees. MonaLoa Malaysian Budgeted sales 100,700 pounds 1,930 pounds Batch size9,300 pounds 430 pounds Setups 3 per batch 3 per batch Purchaseorder size 24,300 pounds 430 pounds Roasting time 1 hour per 100pounds 1 hour per 100 pounds Blending time 0.5 hour per 100 pounds0.5 hour per 100 pounds Packaging time 0.1 hour per 100 pounds 0.1hour per 100 pounds
Required: 1. Using Coffee Bean Inc.’s current product costingsystem,
a. Determine the company’s predetermined overhead rate usingdirect labor cost as the single cost driver.
b. Determine the full product costs and selling prices of onepound of Mona Loa coffee and one pound of Malaysian coffee.
2. Using an activity-based costing approach, develop a newproduct cost for 1 pound of Mona Loa coffee and 1 pound ofMalaysian coffee. Allocate all overhead costs to the 100,700 poundsof Mona Loa and the 1,930 pounds of Malaysian.

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Please hit LIKE button if this helped For any further explanation please put your query in comment will get back to you Activity Cost Driver Budgeted Activity Budgeted Cost Purchasing Purchase orders 1088 572000 Materials handling Setups 1730 713000 Quality control Batches 650 137000 Roasting Roastinghours 95400 954000 Blending Blendinghours 32900 329000 Packaging Packaginghours 25300 253000 Total factory overhead See Answer

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Coffee Bean Inc. (CBI) processes and distributes a variety ofcoffee. CBI buys coffee beans from around the world and roasts,blends, and packages them for resale. Currently, the firm offers 15coffees to gourmet shops in 1-pound bags. The major cost is directmaterials; however, a substantial amount of factory overhead isincurred in the predominantly automated roasting and packingprocess. The company uses relatively little direct labor. Some ofthe coffees are very popular and sell in large volumes; a few ofthe newer brands have very low volumes. CBI prices its coffee atfull product cost, including allocated overhead, plus a markup of30%. If its prices for certain coffees are significantly higherthan the market, CBI lowers its prices. The company competesprimarily on the quality of its products, but customers are priceconscious as well. Data for the current budget include factoryoverhead of $2,300,000, which has been allocated on the basis ofeach product’s direct labor cost. The budgeted direct labor costfor the current year totals $593,000. The firm budgeted $5,300,000for purchase and use of direct materials (mostly coffee beans). Thebudgeted direct costs for 1-pound bags of two of the company’s manyproducts are as follows:Mona Loa Malaysian Direct materials $ 4.20 $ 3.20 Direct labor0.30 0.30CBI’s controller, Mona Clin, believes that its current productcosting system could be providing misleading cost information. Shehas developed this analysis of the current year’s budgeted factoryoverhead costs:Activity Cost Driver Budgeted Activity Budgeted Cost PurchasingPurchase orders 1,088 $ 572,000 Materials handling Setups 1,730713,000 Quality control Batches 650 137,000 Roasting Roasting hours95,400 954,000 Blending Blending hours 32,900 329,000 PackagingPackaging hours 25,300 253,000 Total factory overhead cost $2,958,000Data regarding the current year’s production of just two of itslines, Mona Loa and Malaysian, follow. There is no beginning orending direct materials inventory for either of these coffees. MonaLoa Malaysian Budgeted sales 100,700 pounds 1,930 pounds Batch size9,300 pounds 430 pounds Setups 3 per batch 3 per batch Purchaseorder size 24,300 pounds 430 pounds Roasting time 1 hour per 100pounds 1 hour per 100 pounds Blending time 0.5 hour per 100 pounds0.5 hour per 100 pounds Packaging time 0.1 hour per 100 pounds 0.1hour per 100 poundsRequired: 1. Using Coffee Bean Inc.’s current product costingsystem,a. Determine the company’s predetermined overhead rate usingdirect labor cost as the single cost driver.b. Determine the full product costs and selling prices of onepound of Mona Loa coffee and one pound of Malaysian coffee.2. Using an activity-based costing approach, develop a newproduct cost for 1 pound of Mona Loa coffee and 1 pound ofMalaysian coffee. Allocate all overhead costs to the 100,700 poundsof Mona Loa and the 1,930 pounds of Malaysian.