Table 1 Estimated Costs per pound for French Roast and Golden Roast Product Lines

	French Roast	Golden Roast
Direct Materials	9.00	5.80
Direct Labor*	0.48	0.48
*.04 direct labor hours per pound

1. Calculate the product cost per unit and gross margin for one pound of French Roast and one pound of Golden Roast assuming direct labor hours is used to allocate overhead. Then calculate the product cost per unit and gross margin for one pound of French Roast and one pound of Golden Roast assuming an activity-based costing system is used to allocate overhead.

Table 2 Estimated Overhead Costs and Activities Cost Pool Cost Driver Estimated Activity Estimated OH Costs Procurement Purchase Orders 2,500 orders $1,120,000 Machine Setups Number of Machine Setups 1,250 setups $386,000 Material Handling Number of Batches 625 batches $180,000 Roasting Roasting Hours 118,750 hours $2,090,000 Mixing Mixing Hours 40,000 hours $384,000 Packaging Packaging Hours 30,000 hours $240,000 Total Estimated Overhead $4,400,000 Table 3 Estimated Activity for French Roast and Golden Roast Product Lines French Roast Golden Roast Estimated Sales 100,000 pounds 5,000 pounds Roasting Hours (per 100 pounds) 1.88 hours 1.88 hours Mixing Hours (per 100 pounds) .63 hours .63 hours Packaging Hours (per 100 pounds) .38 hours .38 hours Batch Size 6,250 pounds 625 pounds Setups 2.50 per batch 2.50 per batch Purchase Order Size 25,000 pounds 625 pounds Table 2 Estimated Overhead Costs and Activities Cost Pool Cost Driver Estimated Activity Estimated OH Costs Procurement Purchase Orders 2,500 orders $1,120,000 Machine Setups Number of Machine Setups 1,250 setups $386,000 Material Handling Number of Batches 625 batches $180,000 Roasting Roasting Hours 118,750 hours $2,090,000 Mixing Mixing Hours 40,000 hours $384,000 Packaging Packaging Hours 30,000 hours $240,000 Total Estimated Overhead $4,400,000 Table 3 Estimated Activity for French Roast and Golden Roast Product Lines French Roast Golden Roast Estimated Sales 100,000 pounds 5,000 pounds Roasting Hours (per 100 pounds) 1.88 hours 1.88 hours Mixing Hours (per 100 pounds) .63 hours .63 hours Packaging Hours (per 100 pounds) .38 hours .38 hours Batch Size 6,250 pounds 625 pounds Setups 2.50 per batch 2.50 per batch Purchase Order Size 25,000 pounds 625 pounds