Artwork Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Artwork classifies its various printing jobs as standard jobs or special jobs. Artwork's simple job-costing system has two direct-cost categories (direct materials and direct labor) and a single indirect-cost pool. Artwork operates at capacity and allocates all indirect costs using printing machine-hours as the allocation base.

Artwork 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. Artwork's ABC system would have the same direct-cost categories as its simple costing sytem. 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,Artwork collects the following information for the fiscal year 2014 that just ended.

				Cause-and-Effect Relationship Between
	Standard Job	Special Job	Total	Allocation Base and Activity Cost
Number of printing jobs	1,200	600
Price per job	$1,400	$1,800
Cost of supplies per job	$210	$320
Direct labor costs per job	$130	$210
Printing machine-hours per job	10	10
Cost of printing machine operations			$360,000	Indirect costs of operating printing machines
				increase with printing machine-hours
Setup-hours per job	8	9
Setup costs			$345,000	Indirect setup costs increase with setup-hours
Total number of purchase orders	370	470
Purchase order costs			$23,520	Indirect purchase order costs increase with
				number of purchase orders
Design costs	$9,000	$37,000	$46,000	Design costs are allocated to standard and special
				jobs based on a special study of the design department
Marketing costs as a percentage of revenues	5%	5%	$138,000
Administration costs			$138,180	Demand for administrative resources increases
				with direct labor costs

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 and a special job?
4	How might Artwork use the new cost information from its activity-based costing system to better manage itsbusiness?

Requirement 1. Calculate the cost of a standard job and a special job under the simple costing system. (Round interim calculations to three decimal places, X.XXX and your final answers to the nearest cent, X.XX.)

	Standard Special
Simple Costing System	Job Job
Cost of supplies per job
Direct manufacturing labor cost per job
Indirect cost allocated to each job
Total costs

Requirement 2. Calculate the cost of a standard job and a special job under the activity-based costing system.

Begin by calculating the allocation rates for the following activities. (Abbreviations used: $ = Dollar, DM = Direct manufacturing, Qty. = Quantity. Round the allocation rates to the nearest cent for all activities except Administration; round Administration to five decimal places, X.XXXXX.)

		/		=	ABC Allocation rate
Machine operations		/		=

Setups

/

=

Purchase orders

/

=

Administration

/

=

Now, completing the table for total costs of standard jobs, special jobs and then cost per job for each type of job. (Round your answers to the nearest whole dollar except cost per job. Round cost per job to the nearest cent.)

	Standard Special
ABC Costing System	Job Job
Cost of supplies
Direct manufacturing labor costs
Indirect costs allocated:
Machine operations
Setups
Purchase orders
Design
Marketing
Administration
Total costs