Chapter 11, Problem 11.17AE

Calculate standard cost and gross profit per unit (Learning Objective 1)

Bent Tree Coffee purchases green coffee beans from various suppliers and then roasts the coffee beans in its roasting facility. The roasted beans are sold in 20-pound cases to grocery stores and restaurants for $75 per case. Each case of roasted coffee beans requires 20 pounds of unroasted green coffee beans. The company can purchase the green coffee beans, including freight-in and purchase discounts, for $2.00 per pound. Each case of roasted coffee beans requires 0.10 hours of direct labor in the production process. Direct laborers are paid $23 per hour, which includes payroll taxes and employee benefits. The company uses machine hours to allocate its manufacturing overhead. Each case of roasted coffee beans requires 0.20 machine hours to produce. The company expects to produce 500,000 cases of roasted coffee beans in the upcoming year. At this production volume, the company expects total variable manufacturing overhead to be $3,000,000 for the year. The company also expects to incur $50,000 of fixed manufacturing overhead per month, or $600,000 for the year.

Requirements

1. 1. What is the standard cost of producing one 20-pound case of roasted coffee beans?
2. 2. What is the standard gross profit per 20-pound case of roasted coffee beans?
3. 3. How often should the company reassess standard quantities and standard prices for inputs?