Activity-based costing, oh-costing system. The Hewlett-Packard (HP) plant in Roseville, California, operates at capacity and assembles and tests printed-circuit (PC) boards. The job-costing system at this plant has two direct-cost categories (direct materials and direct manufacturing labor) and seven indirect cost pools. These indirect-cost pools represent the seven activity areas that operating personnel at the plant determined are sufficiently different (in terms of cost-behavior patterns or individual products being assembled) to warrant separate cost pools. The cost-allocation base chosen for each activity area is the cost driver at that activity area.

Debbie Berlant, a newly appointed marketing manager at HP, is attending a training session that describes how an activity-based costing approach was used to design the Roseville plant’s job-costing system. Berlant is provided with the following incomplete information for a specific job (an order for a single PC board, No. A82):

1. Prepare an overview diagram of the activity-based job-costing system at the Roseville plant.

2. Fill in the blanks (noted by question marks) in the cost information provided to Berlant for Job No. A82.

3. Why might manufacturing managers and marketing managers favor this ABC job-costing system over the simple costing system, which had the same two direct-cost categories but only a single indirect- cost pool (manufacturing overhead allocated using direct manufacturing labor costs)?

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Direct materials $75.00 Direct manufacturing labor Manufacturing overhead (see below) Total manufacturing cost 15.00 $90.00 ? Units of Cost- Allocation Base Manufacturing Overhead Manufacturing Used on Cost-Allocation Cost-Allocation Overhead Cost Pool Base Rate Job No. A82 Allocated to Job Axial insertions Dip insertions 1. Axial insertion 0.08 45 6.00 2. Dip insertion 3. Manual insertion 4. Wave solder 0.25 Manual insertions 11 5.50 ? Boards soldered 3.50 3.50 5. Backload Backload insertions ? 4.20 Budgeted time that board is in test activity Budgeted time for defect analysis and repair 90.00 0.25 6. Test 7. Defect analysis 0.10 8.00