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 2013 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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Special Job Standard Cause-and-Effect Relationship Between Allocation Base and Activity Cost Total Job Number of printing jobs 400 200 $ 600 $ 100 $ 90 Price por job 24 750 $ 125 Cost of suppies per job Drect labor cost per jot $ 100 Printing machine-hours per job 10 10 Indirect costs of operating printing machines increase with printing machine hours $75,000 Cost of printing machine operations Setup-hours per job $45,000 Setup costs Indirect setup costs increase with setup-hours 400 Total number of purchase orders 500 Indirect purchase order costs increase with the number of purchase orders $18,000 Purchase order costs Design costs are allcated to standard and special jobs based on a special study of the desiyn depar limenl Dasign costs $4,000 $16,000 $20,000 $19,500 Marketing ccsts as a percentage of revenues 5% 5% Demand for administrative resources $24,000 Administralion cusls increases with direct labor costs