Question 2 Marigold's Nut House is a processor and distributor of a variety of different nuts. The company buys nuts from around the world and roasts, seasons, and packages them for resale. Marigcld's Nut House currently offers 23 different types of nuts in cne-pound bags through catalogs and gourmet shops. The company's major cost is that of the raw nuts; however, the predominantly automated roasting and packing processes consume a substantial amount of manufacturing overhead cost. Th e company uses relatively little direct labor. Some c Ma gold's nuts are very popular and sell in large v umes, but a e o the newer types sel in very low sales volumes. Ma gold's prices its nuts at cost induding overhead nuts are significantly higher than the market price, adjustments are made. Although the company competes primarily on the quality of its products, customers are price conscious. us a markup o 40% the resultin prices o certain Data for the annual budget include manufacturing overhead of $5,800,180, allocated on the basis of each product's direct labor cost. The annual budgeted direct labor cost totals $1,226,000. Based on the sales budget and raw materials standards, purchases and use of raw materials are expected to total 59,060,000 for the year The unit costs of a one-pound bag of two of the company's products follows. Cashews Chestnuts Raw materials Direct labor $3.23 0.23 54.10 0.23 Marigold's controller believes that the traditional costing system may be providing misleading cost inforrmation, so she has developed the following analysis of the annual budgeted manufacturing costs Budgeted Budgeted Activity Cost Driver Purchase orders Number of setups Number of batches Roasting hours Seasoning hours Packaging hours Cost Purchasing Material handling Quality control Rcasting 11,460 $1,191,840 278,400 1,736,100 609,480 473,760 5,800,180 33,860 Packaging 26,320 Total manufacturing overhead cost Data regarding the annual production of cashews and chestnuts follow. All raw materials purchased during the pertod are processed and all nuts produced are sold within the perlad. Cashews Chestnuts Expected sales Batch size Setups Purchase order size Roasting time 121,600 Ibs 10,000 lbs. 4 per batch 2,500 lbs. 1.10 hour/100 lbs. 3,000 Ibs. 500 Ibs. 4 per batch 50 Ibs 1.1 hour/100 lbs