Problem 05-55

Student Name:
Class:

1. (a.)
GOURMET SPECIALTY COFFEE COMPANY
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.
GOURMET SPECIALTY COFFEE COMPANY
Budgeted Manufacturing-Overhead Costs
Budgeted
Cost Driver
Activity
Purchase orders
1,158
Setups
1,800
Batches
720
Roasting hours
96,100
Blending hours
33,600
Packaging hours
26,000

Activity
Purchasing
Material handling
Quality control
Roasting
Blending
Packaging

Jamaican
Standard cost per pound:
Direct material
Direct labor
Purchasing
Material handling
Quality control
Roasting
Blending
Packaging

*
*
*
*
*
*
*
*

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?

Y
Budgeted
Cost
$

Unit
Cost
579,000
720,000
144,000
961,000
336,000
260,000

*
*
*
*
*
*

Columbian Coffee
Standard cost per pound:
Direct material
Direct labor
Purchasing
Material handling
Quality control
Roasting
Blending
Packaging

*
*
*
*
*
*
*
*

Total cost