=+6-21 K Activity-based costing OBJECTIVES 3, 5, 7 The job costing system at Custom Framing has five
Question:
=+6-21 K Activity-based costing OBJECTIVES 3, 5, 7 The job costing system at Custom Framing has five indirect cost pools (purchasing, materials handling, machine maintenance, product inspection and packaging). The company is in the process of bidding on two jobs; Job 215, an order of 15 intricate personalised frames, and Job 325, an order of 6 standard personalised frames. The management accountant wants you to compare overhead allocated under the current simple job-costing system and a newly designed activity-based job-costing system. Total budgeted costs in each indirect cost pool and the budgeted quantity of activity driver are as follows:
M06_HORN3377_02_LT_C06.indd 241 2/09/13 3:26 PM Budgeted overhead
$ Activity cost driver Budgeted quantity of activity driver Purchasing 70 000 Purchase orders processed 2 000 Materials handling 87 500 Materials moves 5 000 Machine maintenance 237 300 Machine-hours 10 500 Product inspection 18 900 Inspections 1 200 Packaging 39 900 Units produced 3 800
$453 600 Information related to Job 215 and Job 325 follows. Job 215 incurs more batch-level costs because it uses more types of materials that need to be purchased, moved and inspected relative to Job 325.
Job 215 Job 325 Number of purchase orders 25 8 Number of materials moves 10 4 Machine-hours 40 60 Number of inspections 9 3 Units produced 15 6 Required 1 Calculate the total overhead allocated to each job under a simple costing system, where overhead is allocated based on machine-hours.
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 9781442563377
2nd Edition
Authors: Monte Wynder, Madhav V. Rajan, Srikant M. Datar, Charles T. Horngren, William Maguire, Rebecca Tan