Coffee Bean Incorporated (CBI) processes and distributes highquality coffee. CBI buys coffee beans from around the world and roasts, blends, and packages them for resale. Currently, the rm offers 2 coffees to gourmet shops in 1pound 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 signicantly 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 $3,056,000, 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 1pound bags are as follows: Mona Loa Malaysian Direct materials $ 4.28 $ 3.28 Direct labor 8.38 8.38 CBl's controller, Mona Clin, believes that its current product costing system could be providing misleading cost information. She has developed this analysis ofthe current year's budgeted factory overhead costs: Budgeted Driver Activity Cost Driver Consu-ption Budgeted Cost Purchasing Purchase orders 1,198 $ 599,888 Materials handling Setups 1,848 736,888 Quality control Batches 268 152,888 Roasting Roasting hours 96,588 965,888 Blending Blending hours 34,888 348,888 Packaging Packaging hours 26,488 264,888 Total factory overhead cost $ 3,856,888 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. 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. Budgeted sales Batch size Setups Purchase order size Roasting time Blending time Packaging time Coffee Bean has total practical capacity as noted in the table below, i.e. processing 1,480 purchase orders, 2,480 setups, etc. These Mona Loa 198,989 pounds 19,898 pounds 3 per batch 25,898 pounds 1 hour per 189 pounds 8.5 hour per 189 pounds 8.1 hour per 189 pounds are the levels of activity work that are sustainable. Activity Purchasing Materials handling Quality control Roasting Blending Packaging Required: 1. Determine the activity rates based on practical capacity and the cost of idle capacity for each activity. [Round l'Usage %" and Practical Capacity 1,489 2,489 1,289 199,899 36,889 39,899 Malaysian 2,889 pounds 598 pounds 3 per batch 598 pounds 1 hour per 189 pounds 8.5 hour per 189 pounds 8.1 hour per 189 pounds "Practical Capactity Rate" to 2 decimal places. For percentages .1234 =12.34%.]