Problem
A company produces numerous blends of coffee, two of which are known as the French Blend and the Italian Blend. The company's ABC system divides its total manufacturing overhead of $1,982,500 into four activity cost pools as shown below. Activity Activity Measure Expected Activity Estimated Cost Purchasing Purchase orders 1,500 orders $ 330,000 Materials handling Number of setups 1,800 setups $ 540,000 Quality control Number of batches 600 batches $ 210,000 Roasting Roasting hours 95,000 hours $ 902,500 Data regarding production of the French and Italian blends is as follows: French Blend Italian Blend Expected sales 100,000 pounds 5,000 pounds Batch size 10,000 pounds 1,250 pounds Setups 3 per batch 3 per batch Purchase order size 20,000 pounds 200 pounds Roasting time per 100 pounds 0.5 hours 0.5 hours Assume the company uses activity-based costing. How much overhead cost would be assigned from the Purchasing activity to the Italian Blend based on its expected sales?