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5-22 Activity-based costing service company. Quikprint Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Quikprint classifies its various printing jobs
5-22 Activity-based costing service company. Quikprint Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Quikprint classifies its various printing jobs as standard jobs or special jobs. Quikprint's simple job-costing system has two direct-cost categories (direct materials and direct labor) and a single indirect-cost pool. Quikprint operates at capacity and allocates all indirect costs using printing machine-hours as the allocation base. Quikprint 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. Quickprint'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 stan- dard and special jobs, Quikprint collects the following information for the fiscal year 2011 that just ended. Home Insert A Page Layout 1 2 Number of printing jobs 3 Price per job 4 Cost of supplies per job 5 Direct labor costs per job 6 Printing machine-hours per job 7 Cost of printing machine operations 9 Setup-hours per job 10 Setup costs 11 Total number of purchase orders 12 Purchase order costs 13 14 Design costs 8 Formulas Data Review View B D Cause-and-Effect Relationship Between Standard Job Special Job Total Allocation Base and Activity Cost 400 200 $1,200 $ 1,500 $ 200 $ 250 $ 180 $ 200 10 10 $150,000 Indirect costs of operating printing machines increase with printing machine hours 7 $ 90,000 Indirect setup costs increase with setup hours 400 500 $ 36,000 Indirect purchase order costs increase with number of purchase orders $8,000 $32,000 $ 40,000 Design costs are allocated to standard and special jobs based on a special study of the design department 5% 5% $ 39,000 $ 48,000 Demand for administrative resources increases with direct labor costs 15 Marketing costs as a percentage of 16 revenues Administration costs 17 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 Quikprint use the new cost information from its activity-based costing system to better man- age its business
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