World Gourmet Coffee Company {WGCC} is a distributor and processor of different blends of coffee. The company buys coffee beans from around the world and roasts, blends, and packages them for resale. WGCC currently has 15 different coffees that it offers to gourmet shops in onepound bags. The major cost is raw materials; however, there is a substantial amount of manufacturing overhead in the predominantly automated roasting and packing process. The company uses relatively little direct labor. Some ofthe 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 20 percent. If prices for certain coffees are significantly higher than market, adjustments are made. The company competes primarily on the quality of its products, but customers are price- conscious as well. Data for the 20x1 budget include manufacturing overhead of $21,919,840, which has been allocated on the basis of each product's directlabor cost The budgeted direct-labor cost for 20x1 totals $2,191,984. Based on the sales budget and rawmaterial budget, purchases and use of raw materials [mostly coffee beans] will total $73,500,000. The expected prime costs for onepound bags of two of the company's products are as follows: Knna Malaysian Direct material $3.88 $4.30 Direct labor 6 . 39 El . 30 WGCC's controller believes the traditional product-costing system may be providing misleading cost information. She has developed an analysis of the 20x1 budgeted manufacturingoverhead costs shown in the following chart. Budgeted Budgeted Activity Cost Driver Activity Cost Purchasing Purchase orders 2, T41 5 3,6?2, 948 Material handling Setups 4, 238 4,515,488 Qualityr control Batches 1,?38 1,814, 688 Roasting Roasting hours 289,288 ?,?48,488 Blending Blending hours ?4,888 2,338,888 Packaging Packaging hours 68,588 2,233,533 Total manufacturingoverhead cost 52119191349 Data regarding the 20x1 production of Kona and Malaysian coffee are shown in the following table. There will be no rawmaterial inventory for either of these coffees at the beginning of the year. Kona Malaysian Budgeted sales 5,488 lb . 11?,888 lb. Batch size 1,358 lb . 23,488 lb. Setups Sper batch Bper batch Purchase order size 1,358 lb. 58,588 lb. Roasting time 1hr. per 188 lb. 1hr. per 188 lb. Blending time 8.5 hr. per 188 lb. 8.5hr. per 188 lb. Packaging time 8.1 hr. per 188 lb. 8.1hr. per 188 lb. Required: 1. Using WGCC's current productcosting system: a. Determine the company's predetermined overhead rate using directlabor cost as the single cost driver. b. Determine the full product costs and selling prices of one pound of Kona coffee and one pound of Malaysian coffee. 1 Develop a new product cost, using an activity-based costing approach, for one pound of Kona coffee and one pound of Malaysian coffee