World Gourmet Coffee Company (WGCC) is a distributor and processor of different blends of coffee. The company buys coff resale WGCC currently has 15 different coffees, which it offers to gourmet shops in 1-kilogram bags. The major cost lies in raw materials, but there is also a substantial amount of manufacturing overhead in the automated roa Some of the coffees are very popular and sell in large volumes, while a few of the newer blends have very low volumes. WGCC prices its coffee at full product cost, including allocated overhead, plus a markup of 30 per cent. If this method leads t downwards. The company competes primarily on the quality of its products, but customers are also price conscious. Data for been allocated on the basis of each product's direct labour cost. The budgeted direct labour cost for next year totals $600 00 raw materials (mostly coffee beans) will total $6 000 000. The expected prime costs for 1-kilogram bags of two of the compa Direct Material Direct Labour Kona $2.50 $0.60 Malaysian $2.70 $0.70 WGCC's controller leaves the traditional product costing system may be providing misleading cost information. She has deve manufacturing overhead cost for next year as follows Purchasing Material handling Quality control Roasting Blending Packaging Quantity of Budgeted Activity Activity Driver activity driver cost Purchase Orders 1232 $616,000 Setups 1730 $1,384,000 Batches 865 $129,750 Roasting hours 99000 $990,000 Blending hours 49500 $495,000 Packaging hours 33000 $660,000 Data for next year's production of the Kona and Malaysian coffee are shown in the following table. There will be no more m beginning of the next year Kona Malaysian Budgeted sales (kg) 2000 100000 Batch size (kg) 500 10000 Setups (per batch) B Purchase order size (kg) 500 25000 Roasting time(per 100 kg) in Hour 1.5 1.5 Blending time per 100 kg) in Minute 45 45 02 0.2 Packaging timeloer 100 kr) in Hour Required 1- using WG Seas current traditional product costing system: a) determine the company's predetermined overhead rate using direct labour cost as the single customer. b) determine the product cost and selling prices of 1 kg of Kona Coffee and 1 kg of Malaysian coffee. 2. Develop new product cost using activity-based costing for 1kg of Kona Coffee and 1kg of Malaysian coffee. 3-(a) Compare the cost of the products calculated in requirement 1 and 2. Provide an explanation as to why the product d different from those using the ABC system. b) Make recommendations for pricing of the two products based on your analysis.