Coffee Bean, Incorporated $(CBI),is$ 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 $of$ different coffees that $it$ sells $to$ gourmet shops $in$ one$-$pound bags. The major cost $of$ the coffee $is$ 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, CBI's budget includes estimated manufacturing overhead cost $of$ $$3,315,000.$ CBI assigns manufacturing overhead $to$ products $on$ the basis $of$ direct labor$-$hours. The expected direct labor cost totals $$425,000,$ which represents $51,000$ 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.

Mona Loa Malaysian

Direct materials $ $4\mathrm{.}30$ $ $3\mathrm{.}30$

Direct labor $(0\mathrm{.}030$ hours per bag$)$ $ $0\mathrm{.}25$ $ $0\mathrm{.}25$

CBI's controller believes that the company$s$ traditional costing system may $be$ providing misleading cost information. $To$ determine whether $or$ not this $is$ correct, the controller has prepared $an$ analysis $of$ the year's expected manufacturing overhead costs, $as$ shown $in$ the following table:

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

Purchasing Purchase orders $1,720$ orders $ $602,000$

Material handling Number $of$ setups $1,810$ setups $814,500$

Quality control Number $of$ batches $610$ batches $183,000$

Roasting Roasting hours $96,200$ roasting hours $1,058,200$

Blending Blending hours $33,600$ blending hours $369,600$

Packaging Packaging hours $28,770$ packaging hours $287,700$

Total manufacturing overhead cost $ $3,315,000$

Data regarding the expected production $of$ Mona Loa and Malaysian coffee are presented below. There will $beno$ raw materials inventory for either $of$ these coffees $at$ the beginning $of$ the year.

Mona Loa Malaysian

Expected sales $126,000$ pounds $3,000$ pounds

Batch size $14,000$ pounds $600$ pounds

Setups $4$ per batch $4$ per batch

Purchase order size $21,000$ pounds $600$ pounds

Roasting time per $100$ pounds $1$ roasting hours $1$ roasting hours

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

Packaging time per $100$ pounds $0\mathrm{.}1$ packaging hours $0\mathrm{.}1$ packaging hours

Required:

Using direct labor$-$hours $as$ the base for assigning manufacturing overhead cost $to$ products, $do$ the following:

Determine the predetermined overhead rate that will $be$ used during the year.

Determine the unit product cost $of$ one pound $of$ the Mona Loa coffee and one pound $of$ the Malaysian coffee.

Using activity$-$based costing $as$ the basis for assigning manufacturing overhead cost $to$ products, $do$ the following:

Determine the total amount $of$ manufacturing overhead cost assigned $to$ the Mona Loa coffee and $to$ the Malaysian coffee for the year.

Using the data developed $in$ part $(2a)$ above, compute the amount $of$ manufacturing overhead cost per pound $of$ the Mona Loa coffee and the Malaysian coffee.

Determine the unit product cost $of$ one pound $of$ the Mona Loa coffee and one pound $of$ the Malaysian coffee. CBI's controller believes that the company's traditional costing system may be providing misleading cost informa

whether or not this is correct, the controller has prepared an analysis of the year's expected manufacturing overt

in the following table: Required:

Using direct labor$-$hours as the base for assigning manufacturing overhead cost to products, do the follo