Java Source, Inc. (JSI), 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. 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 companys predominantly automated roasting, blending, and packing processes require a substantial amount of manufacturing overhead. The company uses relatively little direct labor.

Some of JSIs 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 companys prices competitive.

For the coming year, JSIs budget includes estimated manufacturing overhead cost of $2,864,700. JSI assigns manufacturing overhead to products on the basis of direct labor-hours. The expected direct labor cost totals $564,000, which represents 47,000 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 companys coffee products appear belo

2. Using activity-based absorption costing as the basis for assigning manufacturing overhead cost to products, do the following: a. Determine the total amount of manufacturing overhead cost assigned to the Kenya Dark coffee and to the Viet Select coffee for the year. b. Using the data developed in (2a) above, compute the amount of manufacturing overhead cost per pound of the Kenya Dark coffee and the Viet Select coffee. (Round your answers to 2 decimal places.)

	c. Determine the unit product cost of one pound of the Kenya Dark coffee and one pound of the Viet Select coffee. (Round intermediate calculations and final answers to 2 decimal places.)

	Kenya Dark	Viet Select
Direct materials	4.50	3.50
Direct labor (.035 hours per bag)	0.42	0.42
		Expected Activity for the year		Expected cost for the year
Purchasing	Purchase orders	1,750	orders	525,000
Material handling	Number of setups	1,790	setups	698,100
Quality control	Number of batches	560	batches	140,000
Roasting	Roasting hours	96,200	roasting hours	962,000
Blending	Blending hours	33,400	blending hours	334,000
Packaging	Packaging hours	25,700	packaging hours	205,600
Total manufacturing overhead cost				2,864,700
	Kenya Dark		Viet Select
Expected sales	103,000	pounds	3,000	pounds
Batch size	10,300	pounds	600	pounds
Setups	3	per batch	3	per batch
Purchase order size	20,600	pounds	600	pounds
Roasting time per 100 pounds	1.5	roasting hours	1.5	roasting hours
Blending time per 100 pounds	0.5	blending hours	0.5	blending hours
Packaging time per 100 pounds	0.3	packaging hours	0.3	packaging hours