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Problem 05-55 Student Name:
Class:
1. (a.)
Predetermined overhead rate using direct-labor as
single cost driver:
Total manufacturing overhead cost *
Budgeted direct-labor cost *
Overhead per direct-labor dollar *
1. (b)
Full product costs and selling prices per one-pound
bag:
Jamaican Columbian
Direct material * *
Direct labor * *
Overhead * *
Full product cost * *
Markup * *
Selling price * *
2.
Budgeted Budgeted Unit
Activity
Cost Driver
Activity Cost Cost
Purchasing Purchase orders 1,158 579,000$ *
Material handling Setups 1,800 720,000 *
Quality control Batches 720 144,000 *
Roasting Roasting hours 96,100 961,000 *
Blending Blending hours 33,600 336,000 *
Packaging Packaging hours 26,000 260,000 *
Columbian Coffee
Standard cost per pound: Standard cost per pound:
Direct material *Direct material *
Direct labor *Direct labor *
Purchasing *Purchasing *
Material handling *Material handling *
Quality control *Quality control *
Roasting *Roasting *
Blending *Blending *
Packaging *Packaging *
Total cost *Total cost *
3(a). What are the implications of activity based costing system with respect to the use
of direct labor as a basis for applying overhead to products?
3(b). What are the implications of activity based costing system with respect to the use
of existing product-costing system as the basis for pricing?
Budgeted Manufacturing-Overhead Costs
Jamaican
GOURMET SPECIALTY COFFEE COMPANY
GOURMET SPECIALTY COFFEE COMPANY
Problem 05-55 Student Name:
Class:
1. (a.)
Predetermined overhead rate using direct-labor as
single cost driver:
Total manufacturing overhead cost 12,000,000$
1. (b)
Full product costs and selling prices per one-pound
bag:
Jamaican Columbian
Direct material 2.90$ 3.90$
2.
Budgeted Budgeted Unit
Activity
Cost Driver
Activity Cost Cost
Purchasing Purchase orders 2,316 2,316,000$ 1,000$
Material handling Setups 3,600 2,880,000 800
Columbian Coffee
Standard cost per pound: Standard cost per pound:
Direct material 2.90$ Direct material 3.90$
Direct labor 0.40 Direct labor 0.40
Purchasing 2.00 Purchasing 0.02
3(a). What are the implications of activity based costing system with respect to the use
of direct labor as a basis for applying overhead to products?
3(b). What are the implications of activity based costing system with respect to the use
of existing product-costing system as the basis for pricing?
The ABC analysis indicates that several activities other than direct labor drive overhead. The cost computations show that the current system significantly
The implication of ABC analysis is that the low-volume products are using resources but are not covering their share of the cost of those resources. The Jamaican
Instructor
McGraw-Hill/Irwin
GOURMET SPECIALTY COFFEE COMPANY
GOURMET SPECIALTY COFFEE COMPANY
Budgeted Manufacturing-Overhead Costs
Jamaican
