Question Coronado'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 Coronado's Nut House currently offers 23 different types of nuts in one-pound bags through catalogs and gourmet shops. The company's major cost is that of the raw nuts; however, th predominantly automated roasting and packing processes consume a substantial amount of manufacturing overhead cost. The company uses relatively little direct labor Some of Coronado's nuts are very popular and sell in large volumes, but a few of the newer types sell in very low sales volumes. Coronado's prices its nuts at cost (including overhead) plus a markup of 40%. If the resulting prices of certain 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. Data for the annual budget include manufacturing overhead of $5,651,900, allocated on the basis of each product's direct labor cost. The annual budgeted direct labor cost totals $1,229,000. Based on the sales budget and raw materials standards, purchases and use of raw materials are expected to total $9,170,000 for the year The unit costs of a one-pound bag of two of the company's products follows. Cashews Chestnuts Raw materials $4.30 $3.26 Direct labor 0.26 0.26 Coronado's controller believes that the traditional costing system may be providing misleading cost information, so she has developed the following analysis of the annual budgeted manufacturing costs Budgeted Budgeted Cost Driver Purchase orders Number of setups Number of batches Roasting hours Seasoning hours Packaging hours Activity Cost Activity 11,490 1,770 Purchasing Material handling Quality control Roasting Seasoning Packaging $1,217,940 1,504,500 288,000 1,628,940 566,100 446,420 $5,651,900 600 95,820 33,300 26,260 Total manufacturing overhead cost Data regarding the annual production of cashews and chestnuts follow. All raw materials purchased during the period are processed and all nuts produced are sold within the period