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ACC 650 MODULE 3 HOMEWORK 3

ACC 650 MODULE 3 HOMEWORK 3

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World Gourmet Coffee Company (WGCC) is a distributor and processor of different blends of coffee.The company buys coffee beans from around the world and roasts, blends, and packages them for resale.WGCC currently has 15 different coffees that it offers to gourmet shops in one-pound bags. The majorcost is raw materials; however, there is a substantial amount of manufacturing overhead in the predominantlyautomated roasting and packing process. The company uses relatively little direct labor.Some of the coffees are very popular and sell in large volumes, while a few of the newer blendshave very low volumes. WGCC prices its coffee at full product cost, including allocated overhead, plusa markup of 30 percent. If prices for certain coffees are significantly higher than market, adjustmentsare made. The company competes primarily on the quality of its products, but customers are priceconsciousas well.Data for the 20x1 budget include manufacturing overhead of $3,000,000, which has been allocatedon the basis of each product’s direct-labor cost. The budgeted direct-labor cost for 20x1 totals $600,000.Based on the sales budget and raw-material budget, purchases and use of raw materials (mostly coffeebeans) will total $6,000,000.The expected prime costs for one-pound bags of two of the company’s products are as follows:Kona MalaysianDirect material ............................................................................................................................. $3.20 $4.20

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