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 $3,140,000, 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 $6,000,000 for purchase and useof direct materials (mostly coffee beans).The budgeted direct costs for 1-pound bags are as follows:Mona Loa$ 4.20Malaysian$ 3.200.300.30Direct 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 handlingQuality controlRoastingBlendingPackagingTotal factory overhead costBudgeted salesBatch sizeSetupsPurchase order sizeRoasting timeBlending timePackaging timeCost DriverPurchase orders.ActivityPurchasingMaterials handlingSetupsBatchesQuality controlRoastingBlendingPackagingRoasting 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 pounds.0.5 hour per 100 pounds0.1 hour per 100 poundsBudgetedDriverConsumption1,2581,90082097,10034,60027,000PracticalCapacity1,6002,6001,400102,00038,00032,000Budgeted Cost$ 629,000760,000164,000971,000346,000270,000$ 3,140,000Coffee Bean has total practical capacity as noted in the table below, i.e. processing 1,600 purchase orders, 2,600 setups, etc. Theseare the levels of activity work that are sustainable.Malaysian2,000 pounds500 pounds3 per batch500 pounds1 hour per 100 pounds0.5 hour per 100 pounds0.1 hour per 100 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%.)

Name: Coffee Bean Incorporated (CBI) processes and distributes high-quality
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Description: 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 maj

Usage Based Rate=Budgeted Cost/ Budgeted AcitivityUsage %= Budgeted Acitivity/ Practical…

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uses relatively little direct labor. full product cost, including allocated overhead, plus a markup of 30%. If its prices are significantly h its prices. The company competes primarily on the quality of its products, but customers are price udget include factory overhead of $3,140,000, which has been allocated on the basis of each produc ted direct labor cost for the current year totals $600,000. The firm budgeted $6,000,000 for purcha stly coffee beans). osts for 1-pound bags are as follows: Mona Loa $ 4.20 Malaysian $ 3.20

uses relatively little direct labor. full product cost, including allocated overhead, plus a markup of 30%. If its prices are significantly h its prices. The company competes primarily on the quality of its products, but customers are price udget include factory overhead of $3,140,000, which has been allocated on the basis of each produc ted direct labor cost for the current year totals $600,000. The firm budgeted $6,000,000 for purcha stly coffee beans). osts for 1-pound bags are as follows: Mona Loa $ 4.20 Malaysian $ 3.20

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Coffee Bean Inc. (CBI) processes and distributes a variety of coffee. CBI buys coffee beans from around the world and roasts, blends, and packages them for resale. Currently, the firm offers 15 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. Some of the coffees are very popular and sell in large volumes; a few of the newer brands have very low volumes. CBI prices its coffee at full product cost, including allocated overhead, plus a markup of 30%. If its prices for certain coffees 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 $3,300,000, which has been allocated on the basis of each product's direct labor cost.…
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 $3,238,000, 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…
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 $3,056,000, 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…
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