Solved: Use the same information as above for Coffee

Bean Inc

Use the same information as above for Coffee Bean, Inc. (CBI) except assume now that Mona
Loa and Malaysian are the only two products at CBI. Also, now include the following additional
information about the practical capacity Coffee Bean has in each of
its activities. For example, currently Coffee Bean has total practical capacity for processing
1,400 purchase orders, 2,400 setups, etc. These are the levels of activity work that are
sustainable.
Activity Practical Capacity
Purchasing .......... 1,400
Materials handling ....... 2,400
Quality control ......... 1,200
Roasting ...........100,000
Blending ............36,000
Packaging ..........30,000
Required
1. Determine the activity rates based on practical capacity and the cost of unused capacity for
each activity.
2. Explain the strategic role of the information you have developed in part (1) above.
3. Assume the same information used in parts (1) and (2) above, but now assume also that the
costs in the purchasing activity consists entirely of the cost of 8 employees; the cost in materials
handling consists entirely of the cost of 20 employees; the cost of quality control consists
entirely of the cost of 4 employees; the cost of roasting and blending consists entirely of the
costs of machines—10 roasting machines and 10 blending machines; and the cost of packaging
consists entirely of the cost of 3 employees.
Based on this additional information, what can you now advise management about the
utilization of capacity?

ANSWER
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