Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Data regarding the current year's production for the Mona Loa and Malaysian lines follow. There is no beginning or ending direct 3 materials inventory for
Data regarding the current year's production for the Mona Loa and Malaysian lines follow. There is no beginning or ending direct 3 materials inventory for either of these coffees. Mona Loa Malaysian Budgeted sales 100, 090 pounds 2, 090 pounds Batch size spunod 080'et 500 pounds Setups 3 per batch 3 per batch Purchase order size 25, 090 pounds 500 pounds Roasting time 1 hour per 100 pounds 1 hour per 190 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 190 pounds Coffee Bean has total practical capacity as noted in the table below, i.e. processing 1,480 purchase orders, 2,480 setups, etc. These are the levels of activity work that are sustainable. Practical Activity Capacity Purchasing 1, 480 Materials handling 2 , 480 Quality control 1, 280 Roasting 100, 800 Blending 36 , 800 Packaging 30 , 800 Required: 1. Determine the activity rates based on practical capacity and the cost of idle capacity for each activity. (Round "Usage %" and "Practical Capactity Rate" to 2 decimal places. For percentages .1234 = 12.34%.) Practical Capacity at Practical Unused Idle Capacity Budgeted Usage Based Budgeted Cost Usage % Rate Capacity Rate Capacity Cost Activity Activity Current Spending 1, 198 $ 599,000 1,480 Purchasing 736,000 2,480 Materials handling 1,840 $ 152,000 1,280 Quality control 760 $ $ 965,000 100,800 Roasting 96,500 $ 340,000 36,800 Blending 34,000 30,800 $ 264,000 $ Packaging 26,400 0 $ 3,056,0003 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 $3,056,000, 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 1-pound bags are as follows: Mona Loa Malaysian Direct materials $ 4.20 $ 3.20 Direct labor 0 . 30 0.30 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: Budgeted Driver Activity Cost Driver Consumption Budgeted Cost Purchasing Purchase orders 1, 198 $ 599, 000 Materials handling Setups 1, 840 000'9EL Quality control Batches 760 152, 000 Roasting hours 96 , 500 965, 000 Roasting Blending Blending hours 34, 000 340, 090 Packaging hours 26, 400 264, 000 Packaging $ 3, 056, 000 Total factory overhead cost 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 500 pounds Batch size 10, 000 pounds 3 per batch Setups 3 per batch 25, 000 pounds 500 pounds Purchase order size
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started