Activity-Based Costing and Pricing [L07] Java Source, Inc. (JSI), is a processor and distributor…

Activity-Based Costing and Pricing [L07]

Activity-Based Costing and Pricing [L07] Java Source, Inc. (JSI), is a processor and distributor of...

Java Source, Inc. (JSI), 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. JSI offers a large variety of 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 processes require a substantial amount of manufacturing overhead. The company uses relatively little direct labor.

Some of JSI’s coffees are very popular and sell in large volumes, while a few of the newer blends sell in very low volumes. JSI prices its coffees at manufacturing cost plus a markup of 25%, with some adjustments made to keep the company’s prices competitive.

For the coming year, JSI’s budget includes estimated manufacturing overhead cost of $2,200,000. JSI assigns manufacturing overhead to products on the basis of direct labor-hours. The expected direct labor cost totals $600,000, which represents 50,000 hours of direct labor time. Based on the sales budget and expected raw materials costs, the company will purchase and use $5,000,000 of raw materials (mostly coffee beans) during the year.

The expected costs for direct materials and direct labor for one-pound bags of two of the company’s coffee products appear below.

Kenya Dark

Viet Select

Direct materials

$4.50

$2.90

Direct labor (0.02 hours per bag)

$0.24

$0.24

JSI’s controller believes that the company’s traditional costing system may be providing misleading cost information. To determine whether or not this is correct, the controller has prepared an analysis of the year’s expected manufacturing overhead costs, as shown in the following table:

Activity Cost Pool

Activity Measure

Expected Activity for the Year

Expected Cost for the Year

Purchasing

Purchase orders

2,000 orders

$ 560,000

Material handling

Number of setups

1,000 orders

$193,000

Quality control

Number of batches

500 batches

90,000

Roasting

Roasting hours

95,000 roasting hours

1,045,000

Blending

Blending hours

32,000 blending hours

192,000

Packaging

Packaging hours

24,000 packaging hours

120,000

Total manufacturing overhead cost

$2,200,000

Data regarding the expected production of Kenya Dark and Viet Select coffee are presented below.

Kenya Dark

Viet Select

Expected sales

80,000 pounds

4,000 pounds

Batch size

5,000 pounds

500 pounds

Setups

2 per batch

2 per batch

Purchase order size

20,000 pounds

500 pounds

Roasting time per 100 pounds

1.5 roasting hours

1.5 roasting hours

Blending time per 100 pounds

0.5 blending hours

0.5 blending hours

Packaging time per 100 pounds

0.3 packaging hours

0.3 packaging hours

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more
error: Content is protected !!