ED v ( > 0 xlitemprodpearsoncmgcom G [1] + EB lg Student Portal | Main 0 Topic A: Activity-Based Costing m Do Homework - Ace-360 Topic 4 Assignment 0 5.5: Implementing ActivityBased Costing a 4 AssignmentStephanirae Terrazas Usage of Cost Drivers by Customer Contract - Manufacturing Hamlet Department Cost Driver Overhead in 2017 State Motors Motors Island Auto Design CAD-design-hours $ 35,000 150 250 100 Engineering Engineering-hours 25,000 130 100 270 production Machine-hours 2209"" 300 3.700 1.000 280.000 Total $= 4: Requirements 1. Compute the manufacturing overhead allocated to each customer in 2017 using the simple costing system that uses machine-hours as the allocation base. 2. Compute the manufacturing ovemead allocated to each customer in 2017 using department-based manufacturing overhead rates. 3. Comment on your answers in requirements 1 and 2. Which customer do you think was complaining about being overcharged in the simple system? If the new department-based rates are used to price contmm, which customer(s) will be unhappy? How would you respond to these concerns? 4. How else might 00 use the information available from its department-by-department analysis of manufacturing overhead costs? 5. 00's managers are wondering if they should further rene the department-by-department costing system into an ABC system by identifying different activities within each department. Under what conditions would it not be worthwhile to further rene the department costing system into an ABC system? YOU ANSWERED: State printing jobs as standard iobs or special jobs. 5(Click the icon to view additional information.) 'nt Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Digiprint classies its various To see how activity-based costing would affect the costs of standard and special jobs, Digiprint collects the following information for the scal year 2017 that just ended. 6(Click the icon to View the information.) Read the @uirements". Requirement 1. Calculate the cost of a standard job and a special job under the simple costing system. (Round interim calculations to three decimal places, x.xxx and your nal answers to the nearest cent, X.XX.) simple Costing system Standard Job Special Job Cost of supplies per job Direct manufacturing labor cost per job Indirect cost allocated to each job Total costs Requirement 1. Calculate the cost of a standard job and a special job under the activity-based costing system. Begin by calculating the allocation rates for the following activities (Abbreviations used: 3 = Dollar, DM = Direct manufacturing. Qty. = Quantity. Round the allocation rates to the nearest cent for all activities except Administration; round Administration to ve decimal places. X.XXXXX.) (1) + (2) = Aac Allocation rate Machine operations 0 = (3) Setups + = (4) Purchase orders + = (5) Administration + = (5) Now, completing the table for total costs of standard jobs, special jobs and then cost per job for each type ofjob. (Round your answers to the nearest whole dollar except cost per job. Round cost per job to the nearest cent.) ED v ( ) 0 xlitemprodpearsoncmgcom G [1] + SE | 7 Student Portal | Main 0 Topic A: Activity-Based Costing M De Homework - Ace-360 Topic 4 Assignment 0 5.5: Implementing ActivityBased Costing 4 AssignmentStephanirae Terrazas Now, completing the table for total costs of standard jobs, special jobs and then cost per job for each type ofjob. (Round your answers to the nearest whole dollar except ocst per job. Round cost per job to the nearest oent.) Standard Special ABC Costing System Job Job Cost of supplies Direct manufacturing labor costs Indirect costs allocated: Machine operations Setups Purchase orders Design Marketing Administration Total costs Cost of each job Requirement 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? Standard jobs cost (7) W under the simple costing system titan under the activitybased costing system. Special jobs cost (a) M under the simple costing sytem than under the activitybased costing system. Relative to the ABC system, the simple costing system (9)4 standard jobs and (10) special jobs. Requirement 4. How might Digiprint use the new cost information from its activity-based costing system to better manage its business? 0 A. Under the simple system, Digiprint was making a gross margin of 32% on each slandardjob and 41% on each special job. But, the ABC system reveals that it is actually making a gross margin of about 37% on each standard job and about 33% on each special job, Depending on the market competitiveness. Digiprint may either want to reprioe the different types otjobs, or. it may choose to market special jobs more aggressively than before. 0 B. Under the simple system, Digiprint was making a gross margin of 41% on each standardjob and 32% on each special job. But, the ABC system reveals that it is actually making a gross margin of about 33% on each standard job and about 37% on each special job. Depending on the market competitiveness, Digiprint may either want to reprioe the different types of jobs, or, it may choose to market special jobs more aggressively than before. 0 C. Under the simple system, Digiprint was making a gross margin of 32% on each standardjob and 41% on each special job. But, the ABC system reveals that it is actually making a gross margin of about 37% on each standard job and about 33% on each special iob. Depending on the market competitiveness, Digiprint may either want to reprice the different types ofjobs, or, it may choose to market standard jobs more aggressively than before. 0 D. None of the above. The new cost information would have no impact on how the company manages its business. 5: More Info Digiprint's simple job-costing system has two direct-cost categories (direct materials and direct labor) and a single indirect-cost pool. Digiprint operates at capacity and alloeates all indirect costs using printing machine-hours as the allocation base. Di print 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. Digiprint'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 case: design, purchasing, setup, printing machine operations, marketing, and administration. 6: Data Table A B C D E Cause-and-El'fect Relationship Between Allocation 1 Standard Job Special Job Total Base and ly Cost 2 Number of printing iobs 600 300 3 Price per job $ 1,500 $ 2,000 4 Cost of supplies per job $ 230 $ 290 5 Direct labor costs per job 3 120 $ 210 ED v ( ) 0 xlitemprodpearsoncmgcom G [1] + 33 L Student Portal | Main 0 Topic 4: Activity-Based Costing Q Do Homework Ace360 Topic 4 Assignment 0 5.5: Implementing ActivityBased casting a 4 AssignmentStephanirae Terrazas 5: More Info Digiprint's simple job-costing syswm has two directcost categories (direct materials and direct labor) and a single indirect-cost pool. Digiprint operates at capacity and allocates all indirect costs using priming machinehouis as the allocation base. Digiprint 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. Digiprint's ABC system would have the same direct-cost categories as its simple costing system. However, instead of a single indirectcost pool there would now be six categories tor assigning indirect costs: design. purchasing, setup. printing machine operations. marketing, and administration. 6: Data Table A B C D E Cause-and-Eect Relationship Between Allocation 1 Standard Job Special Job Total Base and A [V Cost 2 Number of printing jobs 600 300 3 Price per job $ 1.500 $ 2,000 4 cast of supplles per jab $ 230 $ 290 5 Direct labor costs per iob $ 120 $ 210 5 Printing machine-hours per job 10 10 Indirect costs of operating printing machines increase 7 Cast of printing machine operations 3 243,000 with printing machine-hours Setup-hours per iob 5 9 9 Setup costs $ 171.000 Indirect setup costs increase with setup-hours 10 Total number of purchase order: 380 480 Indirect purchase order costs increase with number of 11 Purchase order costs $ 30,100 purchase orders Design costs are allocated to standard and special jobs based on a special study of the design 12 Design costs $ 14,000 $ 20,000 $ 34,000 department 13 Marketing costs as a percentage of revenues 5% 5% $ 75,000 Demand for administrative resources increases with 14 Administration costs $ 55,350 direct labor costs 7: Requirements 1 . 2. 3. 4. (1) (5) Calculate the cost of a standard job and a special job under the simple costing system. Calculate the cost of a standard job and a special job under the activity-based costing system. Compare the costs at 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 01 a standard job and a special job? How might Digiprint use the new cost intormation from its activity-based costing system to better manage its business? 0 0 Price per job (2) O 0 Price per job (3) O 0 per machinehour (4) O 0 per machine-hour 0 it at printing jobs 0 Total cost of activity 0 # of printing jobs 0 Total cost of activity 0 per 3 of DM labor cost 0 per purchase order 0 per $ of DM labor cost 0 per purchase order 0 Cost of supplies per job 0 Total # of purchase orders 0 Cost of supplies per job 0 Total ft of purchase orders 0 per $ of sales 0 per setuphour 0 per $ of sales 0 per setup-hour 0 Design costs 0 Total qty consumed 0 Design costs 0 Total qty consumed 0 per inspection 0 per inspection 0 0 per machine-hour (6) O 0 per machine-hour (7) 0 less (8) 0 less (9) O overcasts (10) O overcosts 0 per 3 of DM labor cost 0 per purchase order 0 per $ of DM labor cost 0 per purchase order 0 more 0 more 0 undercosts O undercosts 0 per 5 of sales 0 per setup-hour 0 per $ at sales 0 per setup-hour 0 per inspection 0 per inspection