Speediprint Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Speediprint classifies its various printing jobs as standard jobs or special jobs. Speediprint’s simple job-costing system has two direct-cost categories (direct materials and direct labor) and a single indirect-cost pool. Speediprint operates at capacity and allocates all indirect costs using printing machine-hours as the allocation base.

Speediprint is concerned about the accuracy of the costs assigned to standard and special jobs and therefore is planning to implement an activity-based costing system. Speediprint’s ABC system would have the same direct-cost categories as its simple costing system. However, instead of a single indirect-cost pool there would now be six categories for assigning indirect costs: design, purchasing, setup, printing machine opera-tions, marketing, and administration. To see how activity-based costing would affect the costs of standard and special jobs, Speediprint collects the following information for the fiscal year 2014 that just ended.

Required1. Calculate the cost of a standard job and a special job under the simple costing system.
2. Calculate the cost of a standard job and a special job under the activity- based costing system.
3. Compare the costs of a standard job and a special job in requirements 1 and 2. Why do the simple and activity- based costing systems differ in the cost of a standard job and a special job?
4. How might Speediprint use the new cost information from its activity- based costing system to better manage itsbusiness?

Standard Job Special Job Total Cause-and-Effect Relationship Between Allocation Base and Activity Cost 400 Number of printing jobs Price per job Cost of supplies per job Direct labor costs per job Printing machine-hours per job Cost of printing machine operations 200 600750 S 100 $ 125 S 90 100 10 $ 75,000 Indirect costs of operating printing machines increase with printing machine-hours 45,000 indirect setup costs increase with setup-hours Setup costs Total number of purchase orders Purchase order costs 400 500 $ 18,000 Indirect purchase order costs increase with number of purchase orders Design costs S4,000 $16,000 20,000 Design costs are allocated to standard and special jobs based on a special study of the design department Marketing costs as a percentage of revenues 5% 596 is 19,500 24,000 Demand for administrative resources increases Administration costs with direct labor costs