Coffee Bean Incorporated (CBI) processes and distributes high-quality coffee. CBI buys coffee beans from around the world androasts, blends, and packages them for resale. Currently, the firm offers 2 coffees to gourmet shops in 1-pound bags. The major cost isdirect materials; however, a substantial amount of factory overhead is incurred in the predominantly automated roasting and packingprocess. The company uses relatively little direct labor.CBI prices its coffee at full product cost, including allocated overhead, plus a markup of 30%. If its prices are significantly higher thanthe market, CBI lowers its prices. The company competes primarily on the quality of its products, but customers are price conscious aswell.Data for the current budget include factory overhead of $3,126,000, which has been allocated on the basis of each product's directlabor cost. The budgeted direct labor cost for the current year totals $600,000. The firm budgeted $6,000,000 for purchase and useof direct materials (mostly coffee beans).The budgeted direct costs for 1-pound bags are as follows:Direct materialsDirect laborCBI's controller, Mona Clin, believes that its current product costing system could be providing misleading cost information. She hasdeveloped this analysis of the current year's budgeted factory overhead costs:ActivityPurchasingMaterials handling.Quality controlRoastingBlendingPackagingTotal factory overhead cost.Budgeted salesBatch sizeSetupsPurchase order sizeRoasting timeBlending timePackaging timeMona Loa$ 4.200.30ActivityPurchasingMaterials handlingQuality controlRoastingBlendingPackagingMalaysian$ 3.200.30ActivityPurchasingMaterials handlingQuality controlRoastingBlendingPackagingCost DriverPurchase orders.SetupsBatchesRoasting hoursBlending hoursPackaging hoursData regarding the current year's production for the Mona Loa and Malaysian lines follow. There is no beginning or ending directmaterials inventory for either of these coffees.Mona Loa100,000 pounds10,000 pounds3 per batch25,000 pounds1 hour per 100 pounds0.5 hour per 100 pounds0.1 hour per 100 poundsBudgetedActivityPracticalCapacity1,5802,5801,380101,80037,80031,800BudgetedDriverConsumption1,2481,890810Coffee Bean has total practical capacity as noted in the table below, i.e. processing 1,580 purchase orders, 2,580 setups, etc. Theseare the levels of activity work that are sustainable.97,00034,50026,900Budgeted Cost$ 624,000756,000162,0001,248 $ 624,0001,890 $756,000810 $ 162,00097,000 $ 970,00034,500 $345,00026,900 $ 269,000$ 3,126,000Malaysian2,000 pounds500 pounds3 per batch500 poundsRequired:1. Determine the activity rates based on practical capacity and the cost of idle capacity for each activity. (Round "Usage %" and"Practical Capactity Rate" to 2 decimal places. For percentages .1234 = 12.34%.)970,000345,000269,000$ 3,126,0001 hour per 100 pounds0.5 hour per 100 pounds0.1 hour per 100 poundsBudgeted Cost Usage BasedRatePracticalCapacity atCurrentSpending1,5802,5801,380101,80037,80031,800Usage %PracticalCapacity RateUnusedCapacityIdle CapacityCost$0

Under the ABC Costing overheads are allocated on the basis of cost driver. Cost drivers are the…

Coffee Bean Incorporated (CBI) processes and distributes high-quality coffee. CBI buys coffee beans from around the world and roasts, blends, and packages them for resale. Currently, the firm offers 2 coffees to gourmet shops in 1-pound bags. The major cost is direct materials; however, a substantial amount of factory overhead is incurred in the predominantly automated roasting and packing process. The company uses relatively little direct labor. CBI prices its coffee at full product cost, including allocated overhead, plus a markup of 30%. If its prices are significantly higher than the market, CBI lowers its prices. The company competes primarily on the quality of its products, but customers are price conscious as well. Data for the current budget include factory overhead of $3,126,000, which has been allocated on the basis of each product's direct labor cost. The budgeted direct labor cost for the current year totals $600,000. The firm budgeted $6,000,000 for purchase and use of direct materials (mostly coffee beans). The budgeted direct costs for 1-pound bags are as follows: Mona Loa $ 4.20 0.30 Direct materials Direct labor CBI's controller, Mona Clin, believes that its current product costing system could be providing misleading cost information. She has developed this analysis of the current year's budgeted factory overhead costs: Activity Purchasing Materials handling Quality control Roasting Blending Packaging Total factory overhead cost Budgeted sales. Batch size Setups Purchase order size Roasting time Blending time Packaging time Activity Purchasing Materials handling. Quality control Roasting Blending Packaging Malaysian $ 3.20 0.30 Activity Cost Driver Purchase orders Data regarding the current year's production for the Mona Loa and Malaysian lines follow. There is no beginning or ending direct materials inventory for either of these coffees. Purchasing Materials handling Quality control Roasting Blending Packaging Setups Batches. Roasting hours Blending hours Packaging hours Mona Loa 100,000 pounds 10,000 pounds 3 per batch 25,000 pounds 1 hour per 100 pounds 0.5 hour per 100 pounds 0.1 hour per 100 pounds Practical Capacity 1,580 2,580 1,380 Budgeted Activity Coffee Bean has total practical capacity as noted in the table below, i.e. processing 1,580 purchase orders, 2,580 setups, etc. These are the levels of activity work that are sustainable. 101,800 37,800 31,800 Budgeted Driver Consumption 1,248 1,890 810 97,000 34,500 26,900 Budgeted Cost $624,000 756,000 162,000 970,000 1,248 $ 624,000 1,890 $ 756,000 810 $ 162,000 97,000 $ 970,000 34,500 $ 345,000 26,900 $ 269,000 $ 3,126,000 Malaysian 2,000 pounds 500 pounds 3 per batch 500 pounds Required: 1. Determine the activity rates based on practical capacity and the cost of idle capacity for each activity. (Round "Usage%" and "Practical Capactity Rate" to 2 decimal places. For percentages.1234 = 12.34%.) 345,000 269,000 $ 3,126,000 1 hour per 100 pounds 0.5 hour per 100 pounds 0.1 hour per 100 pounds Budgeted Cost Usage Based Rate Practical Capacity at Current Spending 1,580 2,580 1,380 101,800 37,800 31,800 Usage % Practical Capacity Rate Unused Capacity Idle Capacity Cost $ 0

Coffee Bean Incorporated (CBI) processes and distributes high-quality coffee. CBI buys coffee beans from around the world and roasts, blends, and packages them for resale. Currently, the firm offers 2 coffees to gourmet shops in 1-pound bags. The major cost is direct materials; however, a substantial amount of factory overhead is incurred in the predominantly automated roasting and packing process. The company uses relatively little direct labor. CBI prices its coffee at full product cost, including allocated overhead, plus a markup of 30%. If its prices are significantly higher than the market, CBI lowers its prices. The company competes primarily on the quality of its products, but customers are price conscious as well. Data for the current budget include factory overhead of $3,126,000, which has been allocated on the basis of each product's direct labor cost. The budgeted direct labor cost for the current year totals $600,000. The firm budgeted $6,000,000 for purchase and use of direct materials (mostly coffee beans). The budgeted direct costs for 1-pound bags are as follows: Mona Loa $ 4.20 0.30 Direct materials Direct labor CBI's controller, Mona Clin, believes that its current product costing system could be providing misleading cost information. She has developed this analysis of the current year's budgeted factory overhead costs: Activity Purchasing Materials handling Quality control Roasting Blending Packaging Total factory overhead cost Budgeted sales. Batch size Setups Purchase order size Roasting time Blending time Packaging time Activity Purchasing Materials handling. Quality control Roasting Blending Packaging Malaysian $ 3.20 0.30 Activity Cost Driver Purchase orders Data regarding the current year's production for the Mona Loa and Malaysian lines follow. There is no beginning or ending direct materials inventory for either of these coffees. Purchasing Materials handling Quality control Roasting Blending Packaging Setups Batches. Roasting hours Blending hours Packaging hours Mona Loa 100,000 pounds 10,000 pounds 3 per batch 25,000 pounds 1 hour per 100 pounds 0.5 hour per 100 pounds 0.1 hour per 100 pounds Practical Capacity 1,580 2,580 1,380 Budgeted Activity Coffee Bean has total practical capacity as noted in the table below, i.e. processing 1,580 purchase orders, 2,580 setups, etc. These are the levels of activity work that are sustainable. 101,800 37,800 31,800 Budgeted Driver Consumption 1,248 1,890 810 97,000 34,500 26,900 Budgeted Cost $624,000 756,000 162,000 970,000 1,248 $ 624,000 1,890 $ 756,000 810 $ 162,000 97,000 $ 970,000 34,500 $ 345,000 26,900 $ 269,000 $ 3,126,000 Malaysian 2,000 pounds 500 pounds 3 per batch 500 pounds Required: 1. Determine the activity rates based on practical capacity and the cost of idle capacity for each activity. (Round "Usage%" and "Practical Capactity Rate" to 2 decimal places. For percentages.1234 = 12.34%.) 345,000 269,000 $ 3,126,000 1 hour per 100 pounds 0.5 hour per 100 pounds 0.1 hour per 100 pounds Budgeted Cost Usage Based Rate Practical Capacity at Current Spending 1,580 2,580 1,380 101,800 37,800 31,800 Usage % Practical Capacity Rate Unused Capacity Idle Capacity Cost $ 0

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter11: Linear Optimization Models

Section: Chapter Questions

Problem 7P: Vollmer Manufacturing makes three components for sale to refrigeration companies. The components are...

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