FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:Data regarding the current year's production for the Mona Loa and Malaysian lines follow. There is no beginning or
ending direct materials inventory for either of these coffees.
Malaysian
2,000 pounds
500 pounds
Mona Loa
100,000 pounds
10,000 pounds
per batch
25,000 pounds
1 hour per 100 pounds
0.5 hour per 100 pounds
0.1 hour per 100 pounds
Budgeted sales
Batch size
3 per batch
500 pounds
1 hour per 100 pounds
0.5 hour per 100 pounds
0.1 hour per 100 pounds
Setups
Purchase order size
Roasting time
Blending time
Packaging time
the table below, i.e. processing 1,640 purchase orders, 2,640
has total practical capacity as notec
setups, etc. These are the levels of activity work that are sustainable.
Co
Ве
Practical
Сaраcity
1,640
2,640
1,440
102,400
38,400
32,400
Activity
Purchasing
Materials handling
Quality control
Roasting
Blending
Packaging
Required:
1. Determine the activity rates based on practical capacity and the cost of idle capacity for each activity. (Round
"Usage %" and "Practical Capactity Rate" to 2 decimal places. For percentages .1234 = 12.34%.)
%3D
Transcribed Image Text:Coffee Bean Incorporated (CBI) processes and distributes high-quality coffee. CBI buys coffee beans from around
the world and roasts, blends, and packages them for resale. Currently, the firm offers 2 coffees to gourmet shops in
1-pound bags. The major cost is direct materials; however, a substantial amount of factory overhead is incurred in
the predominantly automated roasting and packing process. The company uses relatively little direct labor.
CBI prices its coffee at full product cost, including allocated overhead, plus a markup of 30%. If its prices are
significantly higher than the market, CBI lowers its prices. The company competes primarily on the quality of its
products, but customers are price conscious as well.
Data for the current budget include factory overhead of $3,168,000, which has been allocated on the basis of each
product's direct labor cost. The budgeted direct labor cost for the current year totals $600,000. The firm budgeted
$6,000,000 for purchase and use of direct materials (mostly coffee beans).
The budgeted direct costs for 1-pound bags are as follows:
Malaysian
$ 3.20
Mona Loa
Direct materials
$ 4.20
Direct labor
0.30
0.30
CBI's controller, Mona Clin, believes that its current product costing system could be providing misleading cost
information. She has developed this analysis of the current year's budgeted factory overhead costs:
Budgeted
Driver
Budgeted Cost
$ 639,000
768,000
168,000
973,000
348,000
Activity
Purchasing
Materials handling
Consumption
1,278
1,920
Cost Driver
Purchase orders
Setups
Quality control
Roasting
Blending
Batches
840
Roasting hours
Blending hours
Packaging hours
97,300
34,800
272,000
$ 3,168,000
Packaging
27,200
Total factory overhead cost
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