Java Source, Incorporated, (JSI) buys coffee beans from around the world and roasts, blends, and packages them for resale. Some of JSI's 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, JSI's budget includes estimated manufacturing overhead cost of $2,971,000. 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 company's coffee products appear below. Direct materials Direct labor (0.030 hours per bag) Kenya Dark Viet Select $ 4.30 $ 0.36 $ 3.60 $ 0.36 JSI's controller believes that the company's 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 year's expected manufacturing overhead costs, as shown in the following table: Activity Cost Pool Purchasing Material handling Quality control Roasting Blending Packaging Total manufacturing overhead cost Activity Measure Purchase orders Number of setups Number of batches Roasting hours Blending hours Packaging hours Expected Activity for the Year 1,700 orders 1,800 setups 560 batches 96,200 roasting hours 33,100 blending hours 25,900 packaging hours Expected Cost for the Year $ 510,000 684,000 128,800 1,058,200 331,000 259,000 $ 2,971,000 Data regarding the expected production and sales of Kenya Dark and Viet Select coffee are presented below.