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Case Construction Company, a three-year-old business, provides contracting and construction services to a variety of clients. Given that each construction job is different from any

Case Construction Company, a three-year-old business, provides contracting and construction services to a variety of clients. Given that each construction job is different from any other, company accountant Susan Kalagnanam decided that it was best to use a job-order costing system to allocate costs to the different jobs. She decided to use construction labour-hours as the basis for overhead allocation. In December 20X4, she estimated the following amounts for the year 20X5:

Page 268

Direct materials $14,560,000
Construction labour 9,800,000
Overhead 7,510,000
Construction labour-hours 500,000

Kalagnanam recorded the following for the first quarter of 20X5 for the three jobs that the company started and completed during the quarter:

School Residential Cinema
Direct materials $824,000 $1,034,600 $1,425,000
Construction labour-hours 66,400 37,200 18,500

Required:

  1. Compute the cost of each job using the current system of cost allocation.

  2. Tyler Case, the companys CEO, recently returned from a seminar on activity-based costing and instructed Kalagnanam to consider implementing the new system. As a first step, he instructed her to analyze the overhead costs for 20X5. Through her research she was able to derive the following breakdown of the estimated overhead costs for 20X5:

    Activity Amount Activity Measure Activity Volume
    Foundation laying $1,685,000 Foundation-laying hours 421,250
    Building construction 1,740,000 Construction labour-hours 500,000
    Painting 1,760,000 Painting-hours 550,000
    Finishing 2,325,000 Finishing-hours 750,000

    She also documented the following activity on the three jobs during the first quarter of 20X5 (in addition to the construction labour-hours consumed by the three jobs):

    School Residential Cinema
    Foundation-laying hours 39,550 38,500 44,250
    Painting-hours 49,380 36,120 47,660
    Finishing-hours 41,460 60,600 94,000

    Calculate the following:

    1. The total cost of each job using activity-based costing.

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