**Please open attachment and answer all questions.**

"The goal is to have the best presentation for management to understand the issue."

Part 1: Traditional Costing

Under ABC, each activity should have a cost per pound (not just an overall overhead)

The goal is to have the best presentation for management to understand the issue. Grading is based on following the instructions. Part 1: Traditional costing: 35 points. Under ABC, each activity should have a cost per pound (not just an overall overhead) for 30 points. Format and final ABC question: 35 points. Case Study: CBI buys coffee beans from around the world and roasts, blends, and packages them for resale. The major cost is direct materials; however, there is substantial manufacturing overhead in the predominantly automated roasting and packing process. The company uses relatively little direct labor. Some of the coffees are very popular and sell in large volumes, whereas a few of the newer blends sell in very low volumes. CBI prices its coffee at budgeted cost, including allocated overhead, plus a markup on cost of 30%. Data for 2013 budget include manufacturing overhead of $3,000,000, which has been allocated on the basis of each product's budgeted direct-labor cost. The budgeted direct-labor cost for 2013 totals $600,000. Purchases and use of materials (mostly coffee beans) are budgeted to total $6,000,000. The budgeted direct costs for one-pound bags of two of the company's products are: Mauna Loa Malaysian Direct Materials Direct Labor $4.20 .30 $3.20 .30 CBI's controller believes the existing simple cost system may be providing misleading cost information. She has developed an activity-based analysis of the 2013 budgeted manufacturing costs, which is shown in the following table: Activity Purchasing Material Handling Quality Control Roasting Blending Packaging Cost Driver Purchase orders Loads moved Batches Roasting-hours Blending-hours Packaging-hours Cost-Driver-Rate $500 400 240 10 10 10 Budgeted data regarding the 2013 production of the Mauna Loa and Malaysian coffee follow. There will be no beginning or ending material inventory for either of these coffees. Mauna Loa Malaysian Expected Sales Purchase orders Batches Loads moved Roasting-hours Blending-hours Packaging-hours 100,000 pounds 4 10 30 1,000 500 100 2,000 pounds 4 4 12 20 10 2 Required: 1. Using CBI's simple costing system: a. Determine the company's 2013 budgeted manufacturing overhead rate using direct-rate cost as the single allocation base. Manufacturing overhead allocated / Budgeted Direct Labor Cost b. Determine the 2013 budgeted costs and selling price of 1 pound of Mauna Loa coffee and 1 pound of Malaysian coffee. 2. Use the controller's activity-based approach to estimate the 2013 cost of 1 pound of a. Mauna Loa coffee b. Malaysian coffee What does ABC tell you that traditional costing does not with regard to this case study