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Ch3_Activity-Based Costing and Pricing

Ch3_Activity-Based Costing and Pricing - Case Study Java...

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Case Study: Java Source, Inc. - Activity-Based Costing and Pricing Java Source, Inc. (JSI), 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. JSI offers a large variety of 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 predominantly automated roasting, blending, and packing processes require a substantial amount of manufacturing overhead. The company uses relatively little direct labor. Some of JSI's coffees are very popular and sell in large volumes, while a few of the newer blends sell in very low volumes. JSI prices its coffees at manufacturing cost plus a markup of 25%, with some adjustments made to keep the company's prices competitive. For the coming year, JSI's budget includes estimated manufacturing overhead cost of $2,200,000. JSI assigns manufacturing overhead to products on the basis of direct labor-hours.
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