Coffee Bean Incorporated (CBH processes and distributes high quality coffee. Cel 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 t-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. Collowers 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 $4.469.165, 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 Direct materials Mona Log $ 4.20 $3.20 0.30 Direct labor 2.30 Cel'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: Bulgeted Driver Activity Cost Driver Consumption Budgeted Cost Purchasing Purchase orders 1.251 $ 638,010 Materials handling Setups 1.854 1,019,700 Quality control Batches 342 202.680 Roasting Roasting hours 108,593 1,628,595 Blending Blending hours 25,224 564,480 Packaging Packaging hours 20,000 415.000 Total factory overhead cost $4,469,165 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 elther of these coffees Mona Low Malaysian Budgeted sales 100,000 pounds 2,000 pounds Batch site 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 Coffee Bean has total practical capacity as noted in the table below, le processing 1800 purchase orders, 2,000 setups, etc. These are the levels of activity work that are sustainable Activity Purchasing Materials handling Quality control Roasting Blending Packaging Practical Capacity 1,800 2,000 1,700 170,000 34,000 40,000 SUFRY Activity Purchasing Materials handling Quality control Roasting Blendis Packaging Practical Capacity 1.500 2.000 1,700 170,000 14,000 10.000 Required: 1. Determine the activity rates based on practical capacity and the cost of idle capacity for each activity (Round "Usage and "Practical Capactity Rote" to 2 decimal places. For percentages 1234 - 12.34%) Unused Capacity Practical Capacity Rate Idle Capacity Coat Usage Usage Based Rate Budgeted Activity Activity Budgeted Cout Purchasing Materials handling Quality contro Roasting Blending Packaging 1.251 5 638 010 1.854 S 1019.700 8425 202 080 108 593 $ 1.628 895 28. 2245 564.480 20 800 5 415.000 $ 4,469 165 Practical Capacity at Current Spending 1.800 2,000 1 700 170.000 34000 40,000
