Jessica Corporation has identified the following overhead costs and cost drivers for the coming year:

The following information was collected on three jobs that were completed during the year:

Budgeted direct labor cost was $ 100,000, and budgeted direct material cost was $ 280,000.
a. If Jessica Corp. uses activity-based costing, how much overhead cost should be assigned to Job 101?
b. If Jessica Corp. uses activity-based costing, compute the cost of each unit of Job 102.
c. Jessica Corp. prices its products at 140 percent of cost. If activity-based costing is used, what price should it set for each unit of Job 103?
d. If Jessica Corp. used a traditional accounting system and allocated overhead based on direct labor cost, by how much would each unit of Job 103 be over-or under-costed compared to activity-based costing? What would be the management implications of this difference?
e. Identify any non-value-added activities or activities that may be currently necessary but appear to be inefficient in Jessica Corp.’s production process. Explain what steps the company management could take to improve the production process and potentially lower manufacturing costs.
f. Jessica Corp. is considering outsourcing inspections to an outside company that would perform the inspections for $ 10 apiece. What are the potential total savings if Jessica outsources the inspections? What other factors should company management consider before making thisdecision?

  • CreatedJune 03, 2014
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