ACIS 2116 Class Examples - Chapters 6 and 7

ACIS 2116 Class Examples - Chapters 6 and 7 - Chapter 6...

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Chapter 6 Example: The Central American Coffee Company (CACC) processes and sells coffee purchased from Central American countries. The controller is trying to decide whether to switch from a traditional overhead costing method to ABC costing. The total direct labor hours worked during the prior year were 8,435. The following overhead cost information is also available for the prior year: Activity Cost Pool Cost Driver Level of Activity Cost Purchasing Number of purchase orders 4,000 orders $ 400,000 Quality Control Number of inspections 1,500 inspections $ 90,000 Roasting Number of pounds roasted 320,000 pounds $ 6,400 Blending Number of pounds blended 320,000 pounds $ 3,200 Packaging Number of Packages 260,000 packages $ 6,500 Total Overhead Cost $506,100 One batch of Café El Salvador requires 1,500 direct labor hours. The following information also relates to one batch of Café El Salvador: Activity Level of Activity Purchasing 700 orders Quality Control 250 inspections Roasting 61,000 pounds Blending 61,000 pounds Packaging 55,000 packages Required: 1. Use ABC costing to calculate the overhead cost for the batch of Café El Salvador.
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