Case Concerning Volume-based Costing Versus Activity-Based Costing: Coffee Bean Inc. (CBI) processes and distributes a variety of coffee. CBI buys coffee beans from around the world and roasts, the blends, and packages them for resale. Currently the firm offers 15 coffees to gourmet shops in 1 pound bags. The major cost is direct materials; however, a substantial amount of factory overhead is incurred in the predominantly automated roasting and packaging process. The company uses relatively little direct labor. Some of the coffees are very popular and sell in large volumes; a few of the newer blends have very low volumes. CBI prices its coffee at full product cost, including allocated overhead, plus a markup of 30%. If its prices for certain coffees are significantly higher than the market, CBI lowers its prices. The company competes primarily on the quality of its products, but customers are price conscious as well. Data for the 2012 budget include factory overhead of $3 million dollars which has been allocated by its current costing system on the basis of each product’s direct labor cost. The budgeted direct labor cost for 2012 totals $600,000. The firm budgeted $6 million for purchases and use of direct materials (mostly coffee beans). The budgeted direct labor costs for 1 pound bags of two of the company's products are as follows: Mona Loa Malaysian Direct materials $4.20 $3.20 Direct labor 0.30 0.30 CBI’s controller, Mona Clinton, believes that its current product costing system could be providing misleading cost information. She has developed the analysis of the 2012 budgeted factory overhead costs: Activity Cost driver Budgeted activity Budgeted costs Purchasing Purchase orders 1,158 $579,000 Materials handling Setups 1,800 720,000 Quality control Batches 720 144,000 Roasting Roasting hours 96,100 961,000 Blending Blending hours 33,600 336,000 Packaging Packaging hours 26,000 260,000 Total...