Coffee Bean, Inc. (CBI), is a processor and distributor of a variety of blends of coffee. The company buys coffee beans from around the world and roasts, blends, and packages them for resale. CBI offers a large variety of different coffees that it sells to gourmet shops in one-pound bags. The major cost of the coffee is raw materials. However, the company's predominantly automated roasting, blending, and packing processes require a substantial amount of manufacturing overhead. The company uses relatively little direct labor. Some of CBI's coffees are very popular and sell in large volumes, while a few of the newer blends sell in very low volumes.

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For the coming year, CBI's budget includes estimated manufacturing overhead cost of $3,000,000. CBI assigns manufacturing overhead to products on the basis of direct labor-hours. The expected direct labor cost totals $600,000, which represents 50,000 hours of direct labor time.

The expected costs for direct materials and direct labor for one-pound bags of two of the company's coffee products appear below.

	Mona Loa	Malaysian
Direct materials.....	$4.20	$3.20
Direct labor (0.025 hours per bag).....	$0.30	$0.30

CBI's controller believes that the company's traditional costing system may be providing misleading cost information. To determine whether or not this is correct, the controller has prepared an analysis of the year's expected manufacturing overhead costs, as shown in the following table:

Activity Cost Pool	Activity Measure	Expected Activity for the Year	Expected Cost for the Year
Purchasing.....	Purchase orders	1,710 orders	$  513,000
Material handling.....	Number of setups	1,800 setups	720,000
Quality control.....	Number of batches	600 batches	144,000
Roasting.....	Roasting hours	96,100 roasting hours	961,000
Blending.....	Blending hours	33,500 blending hours	402,000
Packaging.....	Packaging hours	26,000 packaging hours	260,000
Total manufacturing overhead cost.....			$3,000,000

Data regarding the expected production of Mona Loa and Malaysian coffee are presented below. There will be no raw materials inventory for either of these coffees at the beginning of the year.

	Mona Loa	Malaysian
Expected sales.....	100,000 pounds	2,000 pounds
Batch size.....	10,000 pounds	500 pounds
Setups.....	3 per batch	3 per batch
Purchase order size.....	20,000 pounds	500 pounds
Roasting time per 100 pounds.....	1.0 roasting hours	1.0 roasting hours
Blending time per 100 pounds.....	0.5 blending hours	0.5 blending hours
Packaging time per 100 pounds.....	0.1 packaging hours	0.1 packaging hours

Please use the general ABC template to prepare a report with the similar format as depicted below.

Data
	Mona Loa	Malaysian
Sales in units	?	?
Direct materials per unit	?	?
Direct labor-hours per unit	?	?
Direct labor rate	$?	per DLH
	Estimated
	Overhead	Expected Activity
Activities and Activity Measures	Cost	Mona Loa	Malaysian	Total
Labor related (direct labor-hours)	?	?	?	?
Machine setups (setups)	?
Production orders (orders)	?
Quality control(batchs)	?
	?
Compute the predetermined overhead rate
Estimated total manufacturing overhead (a)		?
Estimated total amount of the allocation base (b)		?	DLHs
Predetermined overhead rate (a) ÷ (b)		?	per DLH
Compute the manufacturing overhead applied	Mona Loa		Malaysian
Direct labor-hours per unit (a)	?	DLHs	?	DLHs
Predetermined overhead rate (b)	?	per DLH	?	per DLH
Manufacturing overhead applied per unit (a) × (b)	?		?
Compute traditional unit product costs	Mona Loa	Malaysian
Direct materials	?	?
Direct labor	?	?
Manufacturing overhead applied	?	?
Traditonal unit product cost	?	?
Compute activity rates	Estimated
	Overhead
Activities	Cost	Total Expected Activity		Activity Rate
Labor related	?	0	DLHs	?	per DLH
Machine setups	?	0	setups	?	per setup
Production orders	?	0	orders	?	per order
General factory	?	0	MHs	?	per MH
Compute the ABC overhead cost per unit		Mona Loa		Malaysian
	Activity	Expected		Expected
Activities	Rate	Activity	Amount	Activity	Amount
Labor related	?	?	?	?	?
Machine setups	?	?	?	?	?
Production orders	?	?	?	?	?
General factory	?	?	?	?	?
Total overhead cost assigned (a)			?		?
Number of units produced (b)			?		?
ABC overhead cost per unit (a) ÷ (b)			?		?
Compute the ABC unit product costs	Mona Loa	Malaysian
Direct materials	?	?
Direct labor	?	?
ABC overhead cost per unit (see above)	?	?
ABC unit product cost	?	?

Answer rating: 100% (QA)

aThe predetermined overhead rate would be computed as follows expected manufacturing overhead costEs... View the full answer