Question: 39. The New Wave Co. is considering a new method for allocating overhead to its two products, regular and premium coffee beans. Currently New Wave

39. The New Wave Co. is considering a new method for allocating overhead to its two products, regular and premium coffee beans. Currently New Wave is using the traditional method to allocate overhead, in which the cost driver is direct labor costs. However, it is interested in using two different drivers: machine hours (MH) for separating and roasting beans, and pounds of coffee for packing and shipping.

Machine hours for the current month are 700 hours, direct labor cost per pound of coffee is $1.25, and direct materials cost per pound of coffee is $1.50. There are 1,000 pounds of coffee packed and shipped for the current month.

The following data are also available:

Regular Premium

Overhead for the current month $5,000.00 Cost pool for separating and roasting beans 3,500.00 150 MH 550 MH Cost pool for packing and shipping 1,500.00 500 pounds 500 pounds What is the total cost per pound for the premium coffee using the new activity-based costing method?

a. $5.00

b. $5.75

c. $7.75

d. $9.75

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