A company produces numerous blends of coffee, two of which are known as the French...
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Accounting
A company produces numerous blends of coffee, two of which are known as the French Blend and the Italian Blend. The companys ABC system divides its total manufacturing overhead of $1,982,500 into four activity cost pools as shown below.
Activity
Activity Measure
Expected Activity
Estimated Cost
Purchasing
Purchase orders
1,500
orders
$ 330,000
Materials handling
Number of setups
1,800
setups
$ 540,000
Quality control
Number of batches
600
batches
$ 210,000
Roasting
Roasting hours
95,000
hours
$ 902,500
Data regarding production of the French and Italian blends is as follows:
French Blend
Italian Blend
Expected sales
100,000
pounds
7,000
pounds
Batch size
10,000
pounds
1,250
pounds
Setups
3
per batch
3
per batch
Purchase order size
20,000
pounds
200
pounds
Roasting time per 100 pounds
0.5
hours
0.5
hours
Assume the company uses activity-based costing. How much overhead cost would be assigned from the Purchasing activity to the Italian Blend based on its expected sales?
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