mame 5-44 Activity-based costing, cost hierarchy. (CMA, adapted) Basista Coffee Ltd. (BCL) buys coffee beans from...

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mame 5-44 Activity-based costing, cost hierarchy. (CMA, adapted) Basista Coffee Ltd. (BCL) buys coffee beans from around the world and roasts, blends, and packages them for resale. The major cost T ACCOUNTING: A MANAU is direct materials; however, there is substantial manufacturing overhead in the predominantly automated roasting and packing process. The company uses relatively little direct labor. Some of the coffees are very popular and sell in large volumes, whereas a few of the newer blends sell in very low volumes. BCL prices its coffee at budgeted cost, including allocated overhead, plus a markup on cost of 30 percent. Data for the current year budget include manufacturing overhead of 30,00,000, which has been allocated on the basis of each product's budgeted direct-labor cost. The budget direct-labor cost for current year totals 6,00,000. Purchases and use of materials (mostly coffee beans) are budgeted to total 60,00,000. The budgeted direct costs for one-kg bags of two of the company's products are: Indian Direct materials Direct labor 42 3 Malaysian 32 3 BCL's controller believes the existing costing system may be providing misleading cost information She has developed an activity-based analysis of current year budgeted manufacturing overhead costs shown in the following table. Activity Purchasing Materials handling Quality control Roasting Blending Packaging Cost Driver Purchase orders Setups Batches Roasting-hours Blending-hours Packaging-hours Cost Driver Rate 5,000 4,000 2,400 100 100 100 Data regarding the current year production of the Indian and Malaysian coffee follow. There will be no beginning or ending materials inventory for either of these coffees. Packaging Data regarding the current year production of the Indian and Malaysian coffee follow. There will be no beginning or ending materials inventory for either of these coffees. Particulars Expected sales Purchase orders Batches Setups Roasting-hours Blending-hours Packaging-hours Indian 1,00,000 kg 4 10 30 1,000 500 100 Malaysian 2,000 kg 4 4 12 20 10 2202 d 1. Using BCL's existing costing system: a. Determine the company's current year budgeted manufacturing overhead rate using direct- labor cost as the single allocation base. b. Determine the current year budgeted costs and selling prices of 1 kg of Indian coffee and 1 kg of Malaysian coffee. 2. Use the controller's activity-based approach to estimate the current year budgeted cost for 1 kg of: a. Indian coffee b. Malaysian coffee Allocate all costs to the 1,00,000 kg of Indian and the 2,000 kg of Malaysian coffee. Compare the results with those in requirement 1. 3. Examine the implications of your answers to requirement 2 for BCL's pricing and product-mix strategy. mame 5-44 Activity-based costing, cost hierarchy. (CMA, adapted) Basista Coffee Ltd. (BCL) buys coffee beans from around the world and roasts, blends, and packages them for resale. The major cost T ACCOUNTING: A MANAU is direct materials; however, there is substantial manufacturing overhead in the predominantly automated roasting and packing process. The company uses relatively little direct labor. Some of the coffees are very popular and sell in large volumes, whereas a few of the newer blends sell in very low volumes. BCL prices its coffee at budgeted cost, including allocated overhead, plus a markup on cost of 30 percent. Data for the current year budget include manufacturing overhead of 30,00,000, which has been allocated on the basis of each product's budgeted direct-labor cost. The budget direct-labor cost for current year totals 6,00,000. Purchases and use of materials (mostly coffee beans) are budgeted to total 60,00,000. The budgeted direct costs for one-kg bags of two of the company's products are: Indian Direct materials Direct labor 42 3 Malaysian 32 3 BCL's controller believes the existing costing system may be providing misleading cost information She has developed an activity-based analysis of current year budgeted manufacturing overhead costs shown in the following table. Activity Purchasing Materials handling Quality control Roasting Blending Packaging Cost Driver Purchase orders Setups Batches Roasting-hours Blending-hours Packaging-hours Cost Driver Rate 5,000 4,000 2,400 100 100 100 Data regarding the current year production of the Indian and Malaysian coffee follow. There will be no beginning or ending materials inventory for either of these coffees. Packaging Data regarding the current year production of the Indian and Malaysian coffee follow. There will be no beginning or ending materials inventory for either of these coffees. Particulars Expected sales Purchase orders Batches Setups Roasting-hours Blending-hours Packaging-hours Indian 1,00,000 kg 4 10 30 1,000 500 100 Malaysian 2,000 kg 4 4 12 20 10 2202 d 1. Using BCL's existing costing system: a. Determine the company's current year budgeted manufacturing overhead rate using direct- labor cost as the single allocation base. b. Determine the current year budgeted costs and selling prices of 1 kg of Indian coffee and 1 kg of Malaysian coffee. 2. Use the controller's activity-based approach to estimate the current year budgeted cost for 1 kg of: a. Indian coffee b. Malaysian coffee Allocate all costs to the 1,00,000 kg of Indian and the 2,000 kg of Malaysian coffee. Compare the results with those in requirement 1. 3. Examine the implications of your answers to requirement 2 for BCL's pricing and product-mix strategy.