Aniline Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Aniline classifies its various printing jobs as standard jobs or special jobs. Aniline’s simple job-costing system has two direct-cost categories (direct materials and direct labor) and a single indirect-cost pool. Aniline operates at capacity and allocates all indirect costs using printing machine-hours as the allocation base. Aniline 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. Aniline’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, Aniline collects the following information for the fiscal year 2020 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 Aniline use the new cost information from its activity-based costing system to better manage its business?

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Home Insert A 1 2 Number of printing jobs 3 Price per job 4 Cost of supplies per job 5 Direct labor costs per job 6 Printing machine-hours per job 7 Cost of printing machine operations 13 14 Design costs 15 16 8 9 Setup-hours per job 10 Setup costs 11 Total number of purchase orders 12 Purchase order costs Page Layout Marketing costs as a percentage of revenues 17 Administration costs Formulas B $ $ $ Standard Job Special Job 1,200 $ 2,000 $ 310 $ 220 10 2,400 1,700 210 170 10 6 330 $ 7,000 Data 4% 9 430 Review D Total $1,008,000 $ 35,000 $ View $ 781,200 $ 4% $ $ G H Cause-and-Effect Relationship Between Allocation Base and Activity Cost E F Indirect costs of operating printing machines increase with printing machine-hours Indirect setup costs increase with setup-hours 27,360 Indirect purchase order costs increase with number of purchase orders 42,000 Design costs are allocated to standard and special jobs based on a special study of the design department 259,200 309,120 Demand for administrative resources increases with direct labor costs