The company uses relatively little direct labor. Some of the coffees are very popular and sell in large volumes, while a few of the newer blends have very low volumes. CBI prices its coffee at manufacturing cost plus a markup of 30%. If CBI’s coffee prices are significantly higher than the market, adjustments are made to bring CBI’s prices more into alignment with the market. The company competes primarily on the quality of its products, but customers are price conscious as well. For the coming year, CBI’s budget includes estimated manufacturing overhead cost of $3,000,000.
CBI assigns manufacturing overhead to products based on 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 $6,000,000 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 many coffee products appear below: Mona Loa $4. 20 0. 30 Malaysian $3. 20 0. 30 Direct Materials Direct Labor (0.025 hours per bag) CBI’s president is very concerned about lowering profit margins.
Several prices have had to be reduced to meet market pressures and other products are selling at good volumes without price adjustments. The president talked with CBI’s controller who believes that the company’s traditional costing system, which uses direct labor costs to allocate manufacturing overhead, 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 Center Cost Driver Purchasing Purchase Orders Materials handling Number of Setups Quality control Number of Batches Roasting Roasting Hours Blending Blending Hours Packaging Packaging Hours Total manufacturing overhead cost: Expected Activity 1,710 orders 1,800 setups 600 batches 96,100 hours 33,500 hours 26,000 hours Expected Cost $ 513,000 720,000 144,000 961,000 402,000 260,000 $3,000,000 Data regarding the expected production of two representative products, Mona Loa and .
Coffee Bean Malaysian coffee, are presented below. There will be no raw materials inventory for either of these coffees at the beginning of the year. Mona Loa Malaysian 100,000 2,000 Pounds 10,000 500 Pounds 3 3 Per batch 20,000 500 Pounds 1. 0 / 100 1. 0 /100 Hours per pound 0. 5 / 100 0. 5 /100 Hours per pound 0. 1 / 100 0. 1 /100 Hours per pound Expected sales Batch size Setups Purchase order size Roasting time Blending time Packaging time Step into the shoes of the controller and prepare a complete report for the president explaining the results of your research.
Compare the two product-costing methods: (1) the currently-used, volume-based method, and (2) an activity-based method. The supporting tables should determine full costs and prices of both products using the two different cost allocation methods. Continue your detailed report to the president by justifying why the company should remain using their present overhead allocation method or to go activity-based costing. Go beyond the accounting issues in your report, mentioning the impact on pricing, volume, and marketing decisions.
Support your recommendation with current articles (Use the online resources of the SGU James J. Kelly Library to locate articles within the last year that deal with cost allocation issues). Three to five supporting articles should be sufficient to support your findings. Since this is a formal report, it will require a transmittal memo summarizing your findings. This memo/summary should be supported by a detailed report including tables and references to business/accounting literature. Include a bibliography in APA format.
Also, since presidents rarely have time to read the entire article, but are interested in their content, provide an abstract of each citation. Remember: appearance, spelling, grammar count. Adapted from Managerial Accounting, Eight Edition, Garrison & Noreen, Irwin, 1997. Page 2 of 2 View as multi-pages TOPICS IN THIS DOCUMENT Cost accounting, Cost, Costs, Activity-based costing, Coffee bean, Coffee, Coffea, Price RELATED DOCUMENTS Science Essay Coffee …? Coffee: To drink or not To drink? Science Essay 2013 Joanne Pang 09P2 Science 9.
6, Semester 1 Tommi Svinhufvud, John Lee 25th September, 2013[Insert Date] Introduction When I first knew that I was going to write about coffee, I thought: Oh yeah, this is going to be easy. When I started working on the essay, I found that it was NOT easy at all. My research answers had to be factually correct, and I needed to use my own words to avoid being… 971 Words | 4 Pages READ FULL DOCUMENT Coffee Descriptive Essay … Coffee Coffee is a dark brown/black naturally caffeinated drink made from passing water through ground roasted coffee beans.
Coffee is used as a great medicine to help patients, and it can be taken as a popular drink all over the world. Caffeinated coffee drinks are largely consumed by people around the world regularly. It has become an internationally popular drink in almost every country…. 1979 Words | 6 Pages READ FULL DOCUMENT Greenbean Coffee Essay … GreenBean Coffee Inc. is a leading business entity in the U. S. Coffee Market. The reputation and success have been built on the quality and value of their commodity, employer of choice policies and progressive environmental policies.
In an effort to maintain its position in the industry, this company pursued an aggressive marketing strategy involving the establishment of grocery store retailing, neighborhood shops and online marketing and sales, thus making… 1735 Words | 8 Pages READ FULL DOCUMENT Essay on Marketing Plan the Coffee Bean and Tea Leaf … Coffee Bean & Tea Leaf Marketing Plan Coffee Bean & Tea Leaf Marketing Plan Coffee Bean & Tea Leaf Overview The Coffee Bean and Tea Leaf [CBTL] was founded by Herb & Mona Hyman in 1963 in Brentwood, California.
CBTL is the oldest and largest privately held specialty coffee and tea retailer in the United States and celebrates its 50th… 1467 Words | 5 Pages READ FULL DOCUMENT Essay about Coffee Bean Inc. … Coffee Bean, Inc. (CBI), 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. CBI currently has 40 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 predominately automated roasting, blending, and packing…
917 Words | 6 Pages READ FULL DOCUMENT Coffee Bean Story Research Paper … “A COFFEE BEAN STORY” Every man dies but not every man really lives. Sometimes when we work each day immersed in global demands, standards or norms set by the society; it becomes easy for us to forget that even the tiniest things in this world can move one person at a time. We forget that often the most important message that life really tells us is to not just merely exist but learn to live our lives to the fullest. August 20, 1995, was the day that I was… 935 Words | 3 Pages.
READ FULL DOCUMENT Essay about History of Coffee … The History of Coffee This is a summary of the long and celebrated history of the 2nd most traded commodity in the world (oil being the first). It is regarded by many as one of the most complex beverage on Earth. Here are a few fun facts about coffee: • Estimated 500 BILLION cups consumed yearly – ? of that at breakfast time.
• Largest consumed of the worlds “legal” drugs. • 100 million people depend of coffee for their survival. •… 1074 Words | 4 Pages READ FULL DOCUMENT History of Coffee Essay …about the History of Coffee Introduction This report aims to clarify how coffee was discovered and became a very popular drink consumed worldwide.
As a tool and for supporting information I have used internet research to collect and compare information from different sources to support the content of this report. Origin of coffee The origin of coffee consists in three different stories: First, coffee had its… 875 Words | 5 Pages READ FULL DOCUMENT CITE THIS DOCUMENT APA (2011, 05). Coffee Bean. StudyMode. com. Retrieved 05, 2011, from http://www. studymode. com/essays/Coffee-Bean-709454. html MLA MLA 7 CHICAGO.