Java Source inc is a processor and disturbtor of a variety

Java Source, Inc (JSI), is a processor and distributor of a variety of bds of coffee. The company buys coffee beans from around the world and roasts, blends, and packages them for resale. JSI 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 JSI's coffees are very popular and sell in large volumes, while a few of the newer blends sell in very low volumes. JSI prices its coffees at manufacturing cost plus a markup of 25%, with some adjustments made to keep the company's prices competitive. For the coming year, JSI's budget includes estimated manufacturing overhead cost of $3,034,200. JSI assigns manufacturing overhead to products on the basis of direct labor-hours. The expected direct labor cost totals $552,000, which represents 46,000 hours of direct labor time. Based on the sales budget and expected raw materials costs, the company will purchase and use $5,000,000 of raw materials (mostly coffee beans) during the year The expected costs for direct materials and direct labor for one-pound bags of two of the company's coffee products appear below Kenya Direct materials Direct labor (035 hours per bag) Dark Viet Select $ 4,40 3.40 0.42$0.42 JSI'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: Expected Cost for the Expected Activity for the Year Activity Cost Pool Purchasing Material handling Quality control Roasting Blending Packaging Activity Measure Purchase orders Year 1,710 orders $ 530,100 739.200 152 500 964 000 334.000 314.400 Number of setups 1,760 setups Number of batches Roasting hours Blending hours Packaging hours 26,200 packaging hours 610 batches 96.400 roasting hours 33,400 blending hours Total manufacturing overhead cost $ 3,034.200