This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here! Gourmet Specialty Coffee Company (GSCC) is a distributor and processor of different blends of coffee. The company buys coffee beans from around the world and roasts, blends, and packages them for resale. GSCC currently has 12 different
coffees that it offers to gourmet shops in one-pound bags. The major cost is raw materials; however, there is a substantial amount of manufacturing overhead in the predominantly automated roasting and packing process. 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. GSCC prices its coffee at full product cost, including allocated overhead, plus a markup of 30 percent. If
prices for certain coffees are significantly higher than market, adjustments are made. The company competes primarily on the quality of its products, but customers are price-conscious as well. Data for the 20x5 budget include manufacturing overhead of $12,000,000, which has been allocated on the basis of each product's direct-labor cost. The budgeted direct-labor cost for 20x5 totals $1,200,000. Based on the sales budget and raw-material budget, purchases and use of raw materials (mostly
coffee beans) will total $5,800,000. GSCC's controller believes the traditional product-costing system may be providing misleading cost information. She has developed an analysis of the 20x5 budgeted manufacturing-overhead costs shown in the following chart. Activity Cost Driver Budgeted Activity Budgeted
Cost Total manufacturing-overhead cost : $12,000,000 Data regarding the 20x5 production of Jamaican and Colombian coffee are shown in the following table. There will be no raw-material inventory for either of these
coffees at the beginning of the year. Jamaican Colombian Required: https://brainmass.com/business/product-costing/activity-based-costing-system-for-coffee-237237 Solution SummaryThe solution explains product costing using traditional costing and activity based costing in a 3-page Word document with worded explanation and calculations. ADVERTISEMENTName 1 Name University: Tutor: Course: Date: 1. Using Coffee Bean Inc.’s current product costing system, a. Determine the company’s predetermined overhead rate using direct labor cost as the single cost driver. Overhead rate = total factory cost/direct labor cost =$3,000,000/$ 600,000 = $5 b. Determine the full product costs and selling prices of one pound of Mona Loa coffee and one pound of Malaysian coffee. Product cost of 1 pound Mona LoaMalaysian Direct materials 4.203.20 Direct labor0.30.3 Factory overhead 55 Total Cost9.58.5 Selling prices = product cost + markup (30%) Mona Loa Markup = 9.5 * 0.3 = $2.85 Selling price = 9.5 + 2.85 = $12.35 Malaysian Mark up = 8.5*0.3=$2.55 Selling price = 8.5+2.55 = $11.05 |