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A2_MGT223H5S 2010 - MGT223H5S 2010 Assignment#2 Problem One...

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1 MGT223H5S 2010 Assignment #2 Problem One Activity-Based Costing Brown Land Coffee Ltd. makes two types of coffee, Gourmet and Espresso, and applies overhead on the basis of direct-labor hours. Anticipated overhead for the upcoming accounting period is $350,000. Information about the products follows. Product Selling Price DM (Coffee beans) DL # of Packs Gourmet $38 $5 1hrs/pack @$12 20,000 Espresso $60 $10 1.5hrs/pack @$12 10,000 Further investigations show that Brown’s manufacturing overhead of $350,000 consist of: Total cost Setups $68,000 Machine depreciation 100,000 Electricity (machinery) 60,000 Product inspection 40,000 Maintenance 80,000 ,and Brown’s pays factory insurance $2,000 (only for Espresso) annually. The costs in the table are driven by number of Setups, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow. Product Number of Setups Number of inspections Gourmet 200 200 Espresso 300 800 Maintenance is performed prior to each production run. Each production run can produce 250 packs of Gourmet coffee or 150 packs of Espresso. Espresso used 45% of the 40,000 total machine hours.
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