Java Source, Incorporated, (JSI) buys coffee beans from around the world and roasts, blends, and packages them for resale. 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%. For the coming year, JSI's budget includes estimated manufacturing overhead cost of $3,074,000. JSI 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. Direct materials Direct labor (0.035 hours per bag) Kenya Dark Viet Select $4.20 $ 0.42 $ 3.50 $ 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: Activity Cost Pool Purchasing Material handling Quality control Roasting Blending Packaging Total manufacturing overhead cost Activity Measure Purchase orders Number of setups Number of batches Roasting hours Blending hours Packaging hours Expected Activity for the Expected Cost Year 1,690 orders 1,810 setups 570 batches 96,100 roasting hours 33,600 blending hours 25,600 packaging hours for the Year $ 490,100 742,100 136,800 961,000 436,800 307,200 $ 3,074,000 Data regarding the expected production and sales of Kenya Dark and Viet Select coffee are presented below. Expected production and sales Batch size Setups Purchase order size Roasting time per 100 pounds Blending time per 100 pounds Packaging time per 100 pounds Required Kenya Dark 97,000 pounds 9,700 pounds 2 per batch 19,400 pounds 1.5 roasting hours 0.5 blending hours 0.3 packaging hours Viet Select 2,000 pounds 400 pounds 2 per batch 400 pounds 1.5 roasting hours 8.5 blending hours 0.3 packaging hours