Question

Using direct labor-hours as the manufacturing overhead cost allocation base, do the following:a. Determine the plantwide predetermined overhead rate that will be used during the year.b. Determine the unit product cost of one pound of Kenya Dark coffee and one pound of Viet Select coffee.2.Using the activity-based absorption costing approach, do the following:a. Determine the total amount of manufacturing overhead cost assigned to Kenya Dark coffee and to Viet Select coffee for the year.b. Using the data developed in (2a) above, compute the amount of manufacturing overhead cost per pound of Kenya Dark coffee and Viet Select coffee.c. Determine the unit product cost of one pound of Kenya Dark coffee and one pound of Viet Select coffee.3.Write a briefmemo to the president of NCI that explains what you found in steps 1 and 2 and that discusses the implications of using direct labor-hours as the only manufacturing overhead cost allocation base.

Answer 1

Step-by-step explanation:

Plantwide overhead rate = Estimated overheads/Total Labor Hours

58.35660377 per hour

Calaculation of Unit product Cost

Kenya Dark Viet Select

Direct Material 4.1 3.1

Direct Labor 0.42 0.42

Overheads 2.042481132 2.042481132

Unit cost 6.562481132 5.562481132

Kenya Dark Viet Select

Activity Cost Pool Activity Measure Expected Activity for the Year Cost Activity Rate Driver Consumption Overhead Assigned Driver Consumption Overhead Assigned

Purchasing Purchase orders 1,740 orders 487,200 280 5 1400 5 1400

Material handling Number of setups 1,790 setups 698,100 390 20 7800 10 3900

Quality control Number of batches 560 batches 128,800 230 10 2300 5 1150

Roasting Roasting hours 95,700 roasting hours 1,148,400 12 1575 18900 15 180

Blending Blending hours 33,400 blending hours 367,400 11 525 5775 5 55

Packaging Packaging hours 26,300 packaging hours 263,000 10 315 3150 3 30

Total manufacturing overhead cost 3,092,900 Total Assigned 39325 6715

Number of pounds 105000 1000

Cost per Pound 0.37452381 6.715

Using ABC

Kenya Dark Viet Select

Direct Material 4.1 3.1

Direct Labor 0.42 0.42

Overheads 0.37452381 6.715

Unit cost 4.89452381 10.235