Activity-Based Costing Problem

This problem relates to ABC Firm, from last weeks module problem, so some of the information may seem familiar. The firm has become increasingly concerned about its cost information and is considering implementing an ABC system. After much research, 3 pools have been identified: materials handling (cost driver is DM$), machining (cost driver is MH) and finishing (cost driver is DLH). Information to support the new system follows:

Estimates Actuals

Direct labour hours 41,000 43,480

Machine hours 207,000 196,600

Direct labour $732,000 $792,310

Direct materials 863,000 858,200

Materials handling costs 334,000 392,000

Machining 1,140,000 1,078,400

Finishing 983,000 1,020,800

On June 17, Job 403 was begun. It was completed on July 30. It required 5,400 machine hours and 960 DLH. Direct manufacturing costs were DM of $7,800 and DL of $21,210.

The job sold for $125,000.

On November 11, Job 890 was begun. It was completed on November 21. It required 3,700 machine hours and 1,250 DLH. Direct manufacturing costs were DM of $7,400 and DL of $28,500. The job sold for $130,000.

1. Assuming the firm uses the new ABC system, compute the costs of Jobs 403 and 890.