Coffee Bean, Inc. (CBI), is a processor and distributor of a variety of blends of coffee. The company buys coffee beans from around the world and roasts, blends, and packages them for resale. CBI offers a large variety of diferent coffees that it sells to gourmet shops in one-pound bags. The major cost of the coflee is raw materials. However, the company's predominantly automated roasting, blending, and packing processes require a substantial amount of manufacturing overhead. The company uses relatively little direct labor. Some of CBI's coffees are very popular and sell in large volumes, while a few of the newer blends sell in very low volumes. For the coming year, CBl's budget includes estimated manufacturing overhead cost of $3,360,000 CBl assigns manufacturing overhead to products on the basis of direct labor-hours. The expected direct labor cost totals $672,000, which represents 56,000 hours of direct labor time The expected costs for direct materials and direct labor for one-pound bags of two of the company's coffee products appear below Direct materials Direct labor (0.025 hours per bag) Mona Loa Malaysian $4.80 3.80 $0.30 $ 0.30 CBI's controller believes that the company's traditional costing system may be providing misleading cost information. To determine hether or not this is correct, the controller has prepared an analysis of the years expected manufacturing overhead costs, as shown in the tollowing table: Expected Cost for the Activity Cost Purchasing Material handling Quality control Roasting Blending Packaging Activity MeasureExpected Activity for the YearYear Purchase orders Number of setups Number of batches Roasting hours Blending hours Packaging hours 1,770 orders 1,860 setups 660 batches S 637.200 855.600 198,000 967.000 409,200 293,000 96,700 roasting hours 34,100 blending hours 29,300 packaging hours Total manufacturing overhead cost 3,360,000 Data regarding the expected production of Mona Loa and Malaysian coffee are presented below There wil be no raw materials inventory for either of these coffees at the beginning of the year ng