Activity-Based Costing as an Alternative to Traditional Product Costing Coffee B

Question

Activity-Based Costing as an Alternative to Traditional Product Costing

Coffee Bean, Inc. (CBI), 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. CBI currently has 40 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 process requires a substantial amount of manufacturing overhead. The company uses relatively little direct labor.

      Some of CBI

Coffee Bean, Inc. (CBI), 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. CBI currently has 40 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 process requires a substantial amount of manufacturing overhead. The company uses relatively little direct labor.

Explanation / Answer

1.

(A) Estimated Overhead: $4500000, Estimated Labour Hour: 80,000 Hrs

Therefore, Predetermined overhead rate= 4500000/80000 = $56.25 per hour

(B)

2.

(A) & (B)

(C)

Particulars Mona Loa Malasyian Coffee Direct Materials 4.2 3.2 Direct Labour 0.3 0.3 Variable Cost 4.5 3.5 Manufacturing Overhead 56.25x0.05            2.81                2.81 Total            7.31                6.31

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