Saved Coffee Bean Inc. (CBI) processes and distributes a variety of coffee. CBI buys coffee beans from around the world and roasts, blends, and packages them for resale. Currently, the firm offers 15 coffees to gourmet shops in 1-pound bags. The major cost is direct materials; however, a substantial amount of factory overhead is incurred 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; a few of the newer brands have very low volumes. CBI prices its coffee at full product cost, including allocated overhead, plus a markup of 30%. If its prices for certain coffees are significantly higher than the market, CBI lowers its prices. The company competes primarily on the quality of its products, but customers are price conscious as well. Data for the current budget include factory overhead of $3,000,000, which has been allocated on the basis of each product's direct labor cost. The budgeted direct labor cost for the current year totals $600,000. The firm budgeted $6,000,000 for purchase and use of direct materials (mostly coffee beans). The budgeted direct costs for 1-pound bags of two of the company's many products are as follows: Malaysian Direct materials Direct labor 0.30 0.30 Mona Loa $ 4.20 $ 3.20 CB's controller, Mona Clin, believes that its current product costing system could be providing misleading cost information. She has developed this analysis of the current year's budgeted factory overhead costs: Activity Purchasing Materials handling Quality control Roasting Blending Packaging Total factory overhead cost Cost Driver Purchase orders Setups Batches Roasting hours Blending hours Packaging hours Budgeted Driver Consumption Budgeted cost 1,158 $ 579,000 1,800 720,000 720 144,000 96,100 961,000 33,600 336,000 26,000 260.000 $3,000,000 Data regarding the current year's production of just two of its lines, Mona Loa and Malaysian, follow. There is no beginning or ending direct materials inventory for either of these coffees. Budgeted sales Batch Bize Setups Mona Loa 100,000 pounds 10,000 pounds 3 per batch Malaysian 2,000 pounds 500 pounds 3 per batch Saved Coffee Bean Inc. (CBI) processes and distributes a variety of coffee. CBI buys coffee beans from around the world and roasts, blends, and packages them for resale. Currently, the firm offers 15 coffees to gourmet shops in 1-pound bags. The major cost is direct materials; however, a substantial amount of factory overhead is incurred 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; a few of the newer brands have very low volumes. CBI prices its coffee at full product cost, including allocated overhead, plus a markup of 30%. If its prices for certain coffees are significantly higher than the market, CBI lowers its prices. The company competes primarily on the quality of its products, but customers are price conscious as well. Data for the current budget include factory overhead of $3,000,000, which has been allocated on the basis of each product's direct labor cost. The budgeted direct labor cost for the current year totals $600,000. The firm budgeted $6,000,000 for purchase and use of direct materials (mostly coffee beans). The budgeted direct costs for 1-pound bags of two of the company's many products are as follows: Malaysian Direct materials Direct labor 0.30 0.30 Mona Loa $ 4.20 $ 3.20 CB's controller, Mona Clin, believes that its current product costing system could be providing misleading cost information. She has developed this analysis of the current year's budgeted factory overhead costs: Activity Purchasing Materials handling Quality control Roasting Blending Packaging Total factory overhead cost Cost Driver Purchase orders Setups Batches Roasting hours Blending hours Packaging hours Budgeted Driver Consumption Budgeted cost 1,158 $ 579,000 1,800 720,000 720 144,000 96,100 961,000 33,600 336,000 26,000 260.000 $3,000,000 Data regarding the current year's production of just two of its lines, Mona Loa and Malaysian, follow. There is no beginning or ending direct materials inventory for either of these coffees. Budgeted sales Batch Bize Setups Mona Loa 100,000 pounds 10,000 pounds 3 per batch Malaysian 2,000 pounds 500 pounds 3 per batch