French Press Coffee Inc. (HFC) processes and distributes a variety of coffees. HFC buys coffee beans from around the world and roasts, blends, and packages them for resale. HFC sells one-pound bags of coffee throughout a series of gourmet shops. the company has low direct labor costs but very high factory overhead.

Data for the 2018 budget includes factory overhead of $2,393,500, which is currently being allocated based on direct labor cost. Budgeted direct labor is $100000.

The budgeted direct costs for a one pound bag of the two most popular coffee blends are as follows:

	Presque Isle Blend	Mentor Headlands blend
Direct material	$4.25	$3.50
Direct labor cost	$0.95	$0.75

The controller believed the current costing system generates misleading information. She has developed the following details:

Activity	Cost Driver	Budgeted Cost
Purchasing	#Purchase Orders	$474000
Material Handling	#Setups	$638000
Quality Control	#batches	$67500
Roasting	Roasting Hours	$920000
Blending	Blending Hours	$190000
Packaging	Packaging Hours	$103000

Total Budgeted cost- $2,392,500

Additional information:

	Presque Isle Blend	Mentor Headlands Blend
Sales in units	$100000 pounds	5000 pounds
Selling price per unit	$30	$24
number of batches	50	5
Number of setups	3 per batch	3 per batch
purchase orders	4	6
roasting time	1 hour per 100 pounds	1 hour per 350 pounds
blending time	0.50 hour per 100 pounds	0.50 hour per 250 pounds
packaging time	0.20 hour per 1000 pounds	0.20 hour per 1000 pound

Required: 1. Assuming manufacturing overhead is allocated based on direct labor costs, calculate the cost per unit of Presque isle blend and mentor headlands blend.

2. Assuming the company uses Activity based costing, calculate the cost per unit of Presque Isle Blend and Mentor Headlands Blend.

3. Calculate Gross Profit for each method of costing.