Complete problem 5-56 and exercise III-3 in the textbook.

Prepare your responses in Excel with each problem on a separate tab.

USE ACC650 Module3-Blank attachment to fill in answers.

Module 3- Activity-Based Costing attachment use to fill in problem 5-56 and Use Attachment xlsx.xlsx to help with two 5-56& 111-3

WHB ACC 650 Module 3 11162016 Name: 5-56 III-3 Identifying the correct Proper Proper format Well written amounts Calculations for numbers reponse 12.00 12.00 1.00 12.00 13.00 Score test test test test Total 25.00 25.00 - Format Legend Entry Points Checksums Feedback Score Corrected entry 50.00 Amt 5-56 Calc 12.00 Format 1.00 ### Name: World Gourmet Coffee Company (WGCC) is a distributor and processor of different blends of coffee. Th and packages them for resale. WGCC currently has 15 different coffees that it offers to gourmet shops in one-pound bags. The major c manufacturing overhead in the predominantly automated roasting and packing process. The company u Some of the coffees are very popular and sell in large volumes, while a few of the newer blends have ve allocated overhead, plus a markup of 30 percent. If prices for certain coffees are significantly higher tha quality of its products, but customers are priceconscious as well. Data for the 20x1 budget include manufacturing overhead of $3,000,000, which has been allocated on for 20x1 totals $600,000. Based on the sales budget and raw-material budget, purchases and use of ra The expected prime costs for one-pound bags of two of the company's products are as follows: Direct Material Direct Labor lb. lb. $ $ Kona 3.20 0.30 WGCC's controller believes the traditional product-costing system may be providing misleading cost inf manufacturing-overhead costs shown in the following chart. Activity Purchasing Material handling Quality control Roasting Blending Packaging Total manufacturing-overhead cost Cost Driver Purchase orders Setups Batches Roasting hours Blending hours. Packaging hours Data regarding the 20x1 production of Kona and Malaysian coffee are shown in the following table. The beginning of the year. Budgeted sales Batch size Setups Purchase order size Roasting time Blending time Packaging time lb. lb. per batch lb. hours/100 lb. hours/100 lb. hours/100 lb. Kona 2,000 500 3 500 1.00 0.50 0.10 Required: 1. Using WGCC's current product-costing system: a. Determine the company's predetermined overhead rate using direct-labor cost as the single c Budgeted Overhead Budgeted Labor Application Rate: b. Determine the full product costs and selling prices of one pound of Kona coffee and one poun Kona Raw Materials (cost/pound) Add: Direct Labor (cost/pound) Prime Cost per ponund Add: Manufacturing Overhead @ Application Rate Total Add: Markup @ Markup Rate Selling Price 2. Develop a new product cost, using an activity-based costing approach, for one pound of Kona Activity Cost Driver Purchasing Material handling Quality control Roasting Blending Packaging Budgeted Cost Purchase orders Setups Batches Roasting hours Blending hours. Packaging hours Kona Cost Driver Cost Drivers Used / Unit Pool Cost/ Activity Cost Driver Cost Drivers Used / Unit Pool Cost/ Activity Purchasing Material handling Quality control Roasting Blending Packaging Add: Direct Materials Add: Direct Labor Cost per Unit Malaysian Purchasing Material handling Quality control Roasting Blending Packaging Add: Direct Materials Add: Direct Labor Cost per Unit 3. What are the implications of the activity-based costing system with respect to: a. The use of direct labor as a basis for applying overhead to products? b. The use of the existing product-costing system as the basis for pricing? Resp - Total 25.00 - sor of different blends of coffee. The company buys coffee beans from around the world and roasts, blends, ps in one-pound bags. The major cost is raw materials; however, there is a substantial amount of d packing process. The company uses relatively little direct labor. a few of the newer blends have very low volumes. WGCC prices its coffee at full product cost, including coffees are significantly higher than market, adjustments are made. The company competes primarily on the 00, which has been allocated on the basis of each product's direct-labor cost. The budgeted direct-labor cost budget, purchases and use of raw materials (mostly coffee beans) will total $6,000,000. s products are as follows: $ $ Malaysian 4.20 0.30 Budgeted Overhead Direct Labor Direct Materials $ 3,000,000 $ 600,000 $ 6,000,000 y be providing misleading cost information. She has developed an analysis of the 20x1 budgeted Budgeted Cost $ 579,000 $ 720,000 $ 144,000 $ 961,000 $ 336,000 $ 260,000 $ 3,000,000 Budgeted Activity 1,158 1,800 720 96,100 33,600 26,000 shown in the following table. There will be no raw-material inventory for either of these coffees at the Malaysian 100,000 10,000 3 25,000 1.00 0.50 0.10 direct-labor cost as the single cost driver. #DIV/0! per Direct Labor $ nd of Kona coffee and one pound of Malaysian coffee. Malaysian pproach, for one pound of Kona coffee and one pound of Malaysian coffee. Budgeted Activity Production (Units) Pool Cost/ Activity Cost per Unit $ Production (Units) - Cost per Unit $ with respect to: - d and roasts, blends, amount of uct cost, including mpetes primarily on the dgeted direct-labor cost 00. 1 budgeted e coffees at the Markup 30% Amt III-3 12.00 Calc 13.00 Format Resp - - Total 25.00 - Name: For each of the following independent cases, use the equation method 10 compute the economic order Annual requirement in units Cost per order $ Annual holding cost per unit $ EOQ Case A 13,230 250 $ 6.00 $ Case B Case C 1,681 560 40 $ 10 20.00 $ 7.00 mpute the economic order quantity. Problem 5-56 Problem 5-56 Activity-Based Costing (LO 1, 2, 4, 5, 7) 2. New product cost, under ABC: $7.46 per pound of Kona World Gourmet Coffee Company (WGCC) is a distributor and processor of different blends of c The company buys coffee beans from around the world and roasts, blends, and packages them WGCC currently has 15 different coffees that it offers to gourmet shops in one-pound bags. Th cost is raw materials; however, there is a substantial amount of manufacturing overhead in the automated roasting and packing process. The company uses relatively little direct labor. Some of the coffees are very popular and sell in large volumes, while a few of the newer have very low volumes. WGCC prices its coffee at full product cost, including allocated overhe a markup of 30 percent. If prices for certain coffees are significantly higher than market, adjus are made. The company competes primarily on the quality of its products, but customers are as well. Data for the 20x1 budget include manufacturing overhead of $3,000,000, which has been on the basis of each product's direct-labor cost. The budgeted direct-labor cost for 20x1 totals Based on the sales budget and raw-material budget, purchases and use of raw materials (mos beans) will total $6,000,000. The expected prime costs for one-pound bags of two of the company's products are as fo Direct material ............................................................................................................................. Direct labor .................................................................................................................................. WGCC's controller believes the traditional product-costing system may be providing misl cost information. She has developed an analysis of the 20x1 budgeted manufacturing-overhea shown in the following chart. Activity Purchasing ................................ Material handling ....................... Cost Driver Purchase orders ........................... Setups ......................................... Budgeted Activity 1,158 ..................... 1,800 ..................... Quality control............................ Batches ........................................ 720 ..................... Roasting .................................... Roasting hours .............................. 96,100 ...................... Blending .................................... Blending hours.............................. 33,600 ...................... Packaging ................................. Packaging hours ........................... 26,000 ...................... Total manufacturing-overhead cost ....................................................................................................... Data regarding the 20x1 production of Kona and Malaysian coffee are shown in the follo table. There will be no raw-material inventory for either of these coffees at the beginning of th Budgeted sales ..................................................................................................... Batch size ............................................................................................................ Setups ................................................................................................................. Purchase order size .............................................................................................. Roasting time ....................................................................................................... Blending time ....................................................................................................... Packaging time ..................................................................................................... Required: 1. Using WGCC's current product-costing system: a. Determine the company's predetermined overhead rate using direct-labor cost as the si cost driver. b. Determine the full product costs and selling prices of one pound of Kona coffee and one pound of Malaysian coffee. 2. Develop a new product cost, using an activity-based costing approach, for one pound of Kon coffee and one pound of Malaysian coffee. 3. What are the implications of the activity-based costing system with respect to a. The use of direct labor as a basis for applying overhead to products? b. The use of the existing product-costing system as the basis for pricing? 1(a). Overhead Rate Overhead per direct-labor dollar 1(b). 2 = Total Manuf Overhd Cost Budgeted Direct Labor = $5 Direct material Direct Labor Overhead Full Product Cost Kona $3.20 $0.30 $1.50 $5.00 Malaysian $4.20 $0.30 $1.50 $6.00 Markup Sell Price $1.50 $6.50 $1.80 $7.80 Activity Cost Purchasing Material Handling Quality control Roasting Blending Packaging Cost Driver Purchase orders Setups Batches Roasting Blending Packaging Kona = Direct labor x Overhead per dire = Full product cost ($5) x 0.3 Budget Activity 1158 1800 720 96100 33600 26000 Malaysian Direct material = Budget Cost 579000 720000 144000 961000 336000 260000 3000000 Kona $3.20 Order=(Budgtd sales/PO size) Setups Batches Roasting Time Blending Time Packaging Time 4 12 4 20 10 2 4 30 10 1000 500 100 Direct Labor Purchasing Material handling Quality control Roasting Blending Packaging $0.30 $1.00 $2.40 $0.40 $0.10 $0.05 $0.01 $7.46 3(a). Abc analysis shows that activities other than direct labor drive overhead. The current system signifigantly understand cost for Kona and overstated cost for Malaysia. 3(b). Low volume products are using resources, but not covering their share of costs. Long run prices should be set above cost otherwise, high volume high margin products are subsiding the low volume costs. and processor of different blends of coffee. nd roasts, blends, and packages them for resale. ourmet shops in one-pound bags. The major unt of manufacturing overhead in the predominantly ses relatively little direct labor. e volumes, while a few of the newer blends duct cost, including allocated overhead, plus gnificantly higher than market, adjustments y of its products, but customers are priceconscious rhead of $3,000,000, which has been allocated eted direct-labor cost for 20x1 totals $600,000. hases and use of raw materials (mostly coffee o of the company's products are as follows: Kona $3.20 $0.30 ................................................ ................................................ Malaysian $4.20 $0.30 osting system may be providing misleading x1 budgeted manufacturing-overhead costs Budgeted Activity ..... 1,158 ..................... ... 1,800 ..................... ..... Budgeted Cost $579,000 720,000 144,000 961,000 336,000 260,000 $3,000,000 720 ..................... ....... 96,100 ...................... ...... 33,600 ...................... ...... 26,000 ...................... ................................................ alaysian coffee are shown in the following f these coffees at the beginning of the year. Kona Malaysian 2,000 lb. 100,000 lb. 500 lb. 10,000 lb. 3 per batch 3 per batch 500 lb. 25,000 lb. 1 hr. per 100 lb. 1 hr. per 100 lb. .5 hr. per 100 lb. .5 hr. per 100 lb. .1 hr. per 100 lb. .1 hr. per 100 lb. d rate using direct-labor cost as the single of one pound of Kona coffee and one sting approach, for one pound of Kona system with respect to head to products? he basis for pricing? $3,000,000 600000 10 Direct labor x Overhead per direct-labor dollar Full product cost ($5) x 0.3 Budget Cost 579000 720000 144000 961000 336000 260000 3000000 Malaysian $4.20 Unit Cost $500 $400 $200 $10 $10 $10 $0.30 $0.20 $0.012 $0.02 $0.10 $0.05 $0.01 $4.89 tated cost for Malaysia. Exercise III-3 1. Using WGCC's current product-costing system: Determine the company's predetermined overhead rate using direct-labor cost as the single cost driver. Budgeted overhead cost Budgeted labor cost $ $ 3,000,000.00 600,000.00 Determine a new product costs and selling prices of one pound of Kona coffee and one pound of Malaysian coffee. Coffee(product) Direct material Direct labor Prime cost Manufacturing overhead Total cost per unit Profit (30% of total cost) Sale price Kona $ $ $ $ $ $ $ Malaysian 3.20 $ 0.30 3.50 $ 1.50 $ 5.00 $ 1.50 $ 6.50 $ 4.20 ### 4.50 1.50 6.00 1.80 7.80 2 Develop a new product cost, using an activity-based costing approach, for one pound of Kona coffee and one pound of Malaysian coffee. Activity Purchasing Material handling Quality control Roasting Blending Packaging Activity Purchasing Material handling Quality control Roasting Blending Packaging Cost Driver Purchase orders Setups Batches Roasting hours Blending hours Packaging hours Product Kona Malaysian Kona Malaysian Kona Malaysian Kona Malaysian Kona Malaysian Kona Malaysian Budgeted activity 1,158 1,800 720 96,100 33,600 26,000 Budgeted cost $ 579,000.00 $ 720,000.00 $ 144,000.00 $ 961,000.00 $ 336,000.00 $ 260,000.00 $ 3,000,000.00 Cost driver used 4 4 12 30 4 10 20 1000 10 500 2 100 The use of direct labor as a basis for applying overhead to products? Activity Kona Malaysian Raw materials $ 3.20 $ 4.20 Direct labor $ 0.30 $ 0.30 $ $ $ $ $ $ $ $ $ $ $ $ Cost rate 500.00 500.00 400.00 400.00 200.00 200.00 10.00 10.00 10.00 10.00 10.00 10.00 Prime cost Add: manufacturing cost Material handling Quality control Roasting Blending Packaging Total cost per unit Profit Sales revenue $ $ $ $ $ $ $ $ $ $ 3.50 1.00 2.40 0.40 0.10 0.05 0.01 7.46 2.24 9.70 $ $ $ $ $ $ $ $ $ $ 4.50 0.02 0.12 0.02 0.10 0.05 0.01 4.82 1.45 6.27 The use of the existing product-costing system as the basis for pricing? Total cost per unit $ Sale price $ Total cost per unit (traditiona $ Sale price (traditional) $ 7.46 9.70 5.00 6.50 $ $ $ $ 4.82 6.27 6.00 7.80 s the single cost driver. $ 5.00 d one pound of Malaysian coffee. pound of Kona coffee Cost driver rate $ 500.00 $ 400.00 $ 200.00 $ 10.00 $ 10.00 $ 10.00 $ $ $ $ $ $ $ $ $ $ $ $ Production 2,000.00 100,000.00 2,000.00 100,000.00 2,000.00 100,000.00 2,000.00 100,000.00 2,000.00 100,000.00 2,000.00 100,000.00 Cost driver per rate $ 1.00 $ 0.02 $ 2.40 $ 0.12 $ 0.40 $ 0.02 $ 0.10 $ 0.10 $ 0.05 $ 0.05 $ 0.01 $ 0.01 Annual requirement (in units) Cost per order Annual holding cost per unit Formula: Economic Order Quantity 2(Annual requirement)(Cost per order) Annual holding cost per unit Case A Case B Case C 13,230 1,681 560 $ 250.00 $ 40.00 $ 10.00 6 20 7 Case A 2(13,230)($250)/6 1050 Case B 2(1681)($40)/20 82 Case C 2(560)(10)/7 40