Coffee Bean, Inc. (CBI) is a distributor and processor of a variety of different blends of coffee.

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Coffee Bean, Inc. (CBI) is a distributor and processor of a variety of different blends of coffee. The company buys coffee beans from around the world and roasts, blends, and packages them for resale. CBI currently has 15 different coffees that it offers to gourmet shops in one-pound bags. The major cost is raw materials; however, there is a substantial amount of manufacturing overhead in the predominantly automated roasting and packing process. The company uses relatively little direct labor. CBI competes primarily on the quality of its products. Some of the coffees are very popular and sell in large volumes, while a few of the newer blends have very low sales volumes. CBI prices its coffee at cost plus a markup of 30 percent. If prices for certain coffees are significantly higher than market, adjustments are made, since customers are price conscious as well. Data for the 1997 budget include manufacturing overhead of $3,000,000, which has been allocated on the basis of each product's direct labor cost. The budgeted direct labor cost for 1997 totals $600,000. Purchases and use of raw materials (mostly coffee beans) are expected to total $6,000,000. The expected prime costs for each one-pound bag of two of the company's products are:

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Managerial Accounting

ISBN: 9780538842822

9th Edition

Authors: Harold M. Sollenberger, Arnold Schneider, Lane K. Anderson

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