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 $3,035,100. JSI assigns manufacturing overhead to products on the basis of direct labor-hours. The expected direct labor cost totals $540,000, which represents 45,000 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	$	4.40		$	3.50
Direct labor (0.035 hours per bag)	$	0.42		$	0.42

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	1,670	orders		$	467,600
Material handling	Number of setups	1,830	setups			713,700
Quality control	Number of batches	570	batches			131,100
Roasting	Roasting hours	95,700	roasting hours			1,052,700
Blending	Blending hours	33,400	blending hours			434,200
Packaging	Packaging hours	26,200	packaging hours			235,800
Total manufacturing overhead cost					$	3,035,100

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

	Kenya Dark		Viet Select
Expected sales	96,000	pounds	2,000	pounds
Batch size	9,600	pounds	400	pounds
Setups	3	per batch	3	per batch
Purchase order size	19,200	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.

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

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.