3 Skipped 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 $3,084,000, 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: Mona Loa Malaysian Direct materials $ 4.20 $ 3.20 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 Activity Cost Driver Consumption Budgeted Cost Purchasing Purchase orders 1,218 $ 609,000 Materials handling Setups 1,860 744,000 Quality control Batches 780 156,000 Roasting Roasting hours 96,700 967,000 Blending Blending hours 34,200 342,000 Packaging Packaging hours 26,600 266, 000 Total factory overhead cost $ 3,084,000 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. Mona Loa Malaysian Budgeted sales 100, 000 pounds 2, 000 pounds 3 Batch size 10, 000 pounds 500 pounds Setups 3 per batch 3 per batch Purchase order size 25, 000 pounds 500 pounds Roasting time 1 hour per 100 pounds 1 hour per 100 pounds Blending time 0.5 hour per 100 pounds 0.5 hour per 100 pounds Packaging time 0. 1 hour per 100 pounds 0.1 hour per 100 pounds Skipped Coffee Bean has total practical capacity as noted in the table below, i.e. processing 1,520 purchase orders, 2,520 setups, etc. These are the levels of activity work that are sustainable. Practical Activity Capacity Purchasing 1, 520 Materials handling 2, 520 Quality control 1, 320 Roasting 101, 200 Blending 37, 200 Packaging 31, 200 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%.) Assessment Tool iFrame Practical Budgeted Budgeted Cost Usage Based Capacity at Practical Unused Idle Capacity Activity Activity Rate Current Usage % Capacity Rate Capacity Cost Spending Purchasing 1,218 $ 609,000 1,520 Materials handling 1,860 $ 744,000 2,520 Quality control 780 $ 156,000 1,320 Roasting 96,700 $ 967,000 101,200 Blending 34,200 $ 342,000 37,200 Packaging 26,600 $ 266,000 31,200 $ 3,084,000 0