Java Source, Inc., (JSI) buys coffee beans from around the world and roasts, blends, and packages them for resale. Some of JSIs coffees are very popular and sell in large volumes, while a few of the newer blends sell in very low volumes. JSI prices its coffees at manufacturing cost plus a markup of 25%.

For the coming year, JSIs budget includes estimated manufacturing overhead cost of $3,207,700. JSI assigns manufacturing overhead to products on the basis of direct labor-hours. The expected direct labor cost totals $612,000, which represents 51,000 hours of direct labor time.

The expected costs for direct materials and direct labor for one-pound bags of two of the companys coffee products appear below.

Kenya Dark Viet Select

Direct materials $ 4.30 $ 3.10

Direct labor (0.040 hours per bag) $ 0.48 $ 0.48

JSIs controller believes that the companys traditional costing system may be providing misleading cost information. To determine whether or not this is correct, the controller has prepared an analysis of the years expected manufacturing overhead costs, as shown in the following table:

Activity Cost Pool Activity Measure Expected Activity for the Year Expected Cost for the Year

Purchasing Purchase orders 1,660 orders $ 531,200

Material handling Number of setups 1,850 setups 721,500

Quality control Number of batches 570 batches 148,200

Roasting Roasting hours 96,300 roasting hours 1,155,600

Blending Blending hours 33,600 blending hours 369,600

Packaging Packaging hours 25,600 packaging hours 281,600

Total manufacturing overhead cost $ 3,207,700

Data regarding the expected production of Kenya Dark and Viet Select coffee are presented below.

Kenya Dark Viet Select

Expected sales 102,000 pounds 2,000 pounds

Batch size 10,200 pounds 400 pounds

Setups 2 per batch 2 per batch

Purchase order size 20,400 pounds 400 pounds

Roasting time per 100 pounds 1.5 roasting hours 1.5 roasting hours

Blending time per 100 pounds 0.5 blending hours 0.5 blending hours

Packaging time per 100 pounds 0.3 packaging hours 0.3 packaging hours

Required:

1. Using direct labor-hours as the manufacturing overhead cost allocation base, do the following:

a. Determine the plantwide predetermined overhead rate that will be used during the year.

Using direct labor-hours as the manufacturing overhead cost allocation base. Determine the plantwide predetermined overhead rate that will be used during the year. (Round your answer to 2 decimal places.)

Predetermined overhead rate

per DLH

b. Determine the unit product cost of one pound of Kenya Dark coffee and one pound of Viet Select coffee.

Using direct labor-hours as the manufacturing overhead cost allocation base. Determine the plantwide predetermined overhead rate that will be used during the year. (Round your answer to 2 decimal places.)

2. Using the activity-based absorption costing approach, do the following: a. Determine the total amount of manufacturing overhead cost assigned to Kenya Dark coffee and to Viet Select coffee for the year. b. Using the data developed in (2a) above, compute the amount of manufacturing overhead cost per pound of Kenya Dark coffee and Viet Select coffee. c. Determine the unit product cost of one pound of Kenya Dark coffee and one pound of Viet Select coffee.