Java Source, Incorporated, (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 $3,081,200. JSI assigns manufacturing overhead to products on the basis of direct labor-hours. The expected direct labor cost totals $564,000, which represents 47,000 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	$ 4.50	$ 3.20
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	1,660	orders	$ 498,000
Material handling	Number of setups	1,780	setups	712,000
Quality control	Number of batches	590	batches	129,800
Roasting	Roasting hours	96,200	roasting hours	1,058,200
Blending	Blending hours	33,100	blending hours	397,200
Packaging	Packaging hours	26,000	packaging hours	286,000
Total manufacturing overhead cost				$ 3,081,200

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

	Kenya Dark		Viet Select
Expected production and sales	99,000	pounds	2,000	pounds
Batch size	9,900	pounds	400	pounds
Setups	4	per batch	4	per batch
Purchase order size	19,800	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.