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 $$3,098,000,$ which has been allocated on the basis of each product$$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 $ $4\mathrm{.}20$ $ $3\mathrm{.}20$

Direct labor $0\mathrm{.}300\mathrm{.}30$

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:

Activity Cost Driver Budgeted Driver Consumption Budgeted Cost

Purchasing Purchase orders $1,228$ $ $614,000$

Materials handling Setups $1,870748,000$

Quality control Batches $790158,000$

Roasting Roasting hours $96,800968,000$

Blending Blending hours $34,300343,000$

Packaging Packaging hours $26,700267,000$

Total factory overhead cost $ $3,098,000$

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

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 $0\mathrm{.}5$ hour per $100$ pounds $0\mathrm{.}5$ hour per $100$ pounds

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

Coffee Bean has total practical capacity as noted in the table below, i$.$e$.$ processing $1,540$ purchase orders, $2,540$ setups, etc. These are the levels of activity work that are sustainable.

Activity Practical Capacity

Purchasing $1,540$

Materials handling $2,540$

Quality control $1,340$

Roasting $101,400$

Blending $37,400$

Packaging $31,400$

Required:

$1.$ Determine the activity rates based on practical capacity and the cost of idle capacity for each activity.