80.2K

Verified Solution

Link Copied!

Java Source, Incorporated, $($JSI$)$ roasts, blends, and packages coffee beans for resale. Some of JSI$$s coffees sell in large volumes, while some newer blends sell in very low volumes. JSI prices its coffees at manufacturing cost plus a markup of $25\%.$

For next year, JSI$$s budget includes estimated manufacturing overhead cost of $$2,936,900.$ JSI allocates manufacturing overhead to products using direct labor$-$hours. The expected direct labor cost totals $$576,000,$ which represents $48,000$ hours of direct labor time.

The expected direct materials and direct labor costs for one$-$pound bags of two of the company$$s coffee blends appear below.

Kenya Dark Viet Select

Direct materials $ $4\mathrm{.}40$ $ $3\mathrm{.}40$

Direct labor $(0\mathrm{.}025$ hour per bag$)$ $ $0\mathrm{.}30$ $ $0\mathrm{.}30$

JSI$$s controller believes the company$$s traditional costing system may be providing misleading cost information; therefore, he gathered the following activity$-$based cost information:

Activity Cost Pool Activity Measure Expected Activity for the Year Expected Cost for the Year

Purchasing Purchase orders $1,700$ orders $ $510,000$

Material handling Number of setups $1,780$ setups $712,000$

Quality control Number of batches $590$ batches $135,700$

Roasting Roasting hours $95,500$ roasting hours $859,500$

Blending Blending hours $33,700$ blending hours $438,100$

Packaging Packaging hours $25,600$ packaging hours $281,600$

Total manufacturing overhead cost $ $2,936,900$

Data regarding the expected production and sales of Kenya Dark and Viet Select coffee are presented below.

Kenya Dark Viet Select

Expected production and sales $96,000$ pounds $3,000$ pounds

Batch size $9,600$ pounds $600$ pounds

Setups $3$ per batch $3$ per batch

Purchase order size $19,200$ pounds $600$ pounds

Roasting time per $100$ pounds $1\mathrm{.}5$ roasting hours $1\mathrm{.}5$ roasting hours

Blending time per $100$ pounds $0\mathrm{.}5$ blending hour $0\mathrm{.}5$ blending hour

Packaging time per $100$ pounds $0\mathrm{.}3$ packaging hour $0\mathrm{.}3$ packaging hour

Required:

Using direct labor$-$hours as the manufacturing overhead cost allocation base:

Calculate the plantwide predetermined overhead rate.

Calculate the unit product cost of one pound of Kenya Dark and one pound of Viet Select.

Using the activity$-$based absorption costing approach:

Calculate the total manufacturing overhead cost allocated to Kenya Dark and Viet Select.

Using the data developed in $(2$a$)$ above, compute Kenya Dark$$s and Viet Select$$s manufacturing overhead cost per pound.

Calculate the unit product cost of one pound of Kenya Dark and one pound of Viet Select.

Answer & Explanation Solved by verified expert

See Answer