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 operations, 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 2017 that just ended.

Required
1. 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 its business?

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Cause-and-Effect Relationship Between Allocation Base and Activity Cost Standard Job Special Job Total Number of printin Price Cost of supplies Direct labor costs per j Printing machine-hours per Cost of printing machine operations 200 750 $ 100125 $ 90$100 10 400 600 10 $ 75,000 Indirect costs of operating printing machines Setup-hours Setup costs Total number of purchase Purchase order costs increase with printing machine-hours $45,000 Indirect setup costs increase with setup-hours 18,000 Indirect purchase order costs increase with orders 400 500 number of ase orders Design costs $4,000$16,00020,000 n costs are allocated to standard and special s based on a special study of the design artment Marketing costs as a percentage df revenues 5% 5% | $ 19,500 24,000 Demand for administrative resources increases Administration costs with direct labor costs