Recall that Piedmont Computer Company allocated manufacturing overhead costs to jobs based on a predetermined overhead allocation rate, computed as 25% of direct labor costs. Piedmont Computer Company is now considering using an ABC system. Information about ABC costs for 2020 follows: 

Records for two jobs appear here:

Requirements 

1. Compute the total cost for each job using activity-based costing. The cost of direct labor is $25 per hour. 

2. Is the job cost greater or less than that computed in Chapter 17 for each job? Why? 

3. If Piedmont Computer Company wants to earn an operating income equal to 45% of the total cost, what sales price should it charge each of these two customers?

Transcribed Image Text:

Activity Assembly Programming Testing Allocation Base Number of parts Number of direct labor hours Number of tests Predetermined Overhead Allocation Rate $ 0.25 3.50 125.00