CP19-46 (similar to) Using a job order costing system, Pierre Computer Company estimated the total cost of two jobs as follows: (Click the icon to view the estimates under job costing.) |(Click the icon to view the ABC information.) (Click the icon to view the records for two clients.) Pierre Computer Company is now considering using an ABC system. Information about ABC costs and records for the same two jobs for 2020 follow: Read the requirements. Requirement 1. Compute the total cost for each job using activity-based costing (ABC). The cost of direct labor is $15 per hour. Activity-based costing: Job 721 Job 722 Direct costs: Total direct material costs Total direct labor costs Indirect costs: Asssembly costs Programming costs Testing costs Total costs Requirement 2. Is the job cost greater or less than that computed under standard costing for each job? Why? resources The cost of the Job 721 using ABC is than the job cost under the standard costing (single-allocation base) system. Under the ABC costing system we can tell that this job is consuming than was being accounted for under the single-allocation-base system, causing Job 721 to be v under the standard costing system. resources The cost of the Job 722 using ABC is than the job cost under the standard costing (single-allocation base) system. Under the ABC costing system we can tell that this job is consuming than was being accounted for under the single-allocation-base system, causing Job 722 to be under the standard costing system. Under the system, overhead is allocated to the two jobs based solely on a percentage of direct labor costs, using a single predetermined overhead allocation rate. This costing system the way the two jobs actually use the company's resources (activities). takes into account assembling, programming, and testing activities when allocating overhead costs to the two jobs. Because reflects the way the jobs actually use the company's resources, costs are closer to the true costs of completing each job. Requirement 3. If Pierre Computer Company wants to earn an operating income equal to 20% of the total cost, what sales price should it charge each of these two customers? Complete the table below to determine what sales price the company should charge for each of the two jobs. (Assume the ABC method is used. Round your answers to the nearest whole dollar.) Job 721 Job 722 Sales price Job 721 Job 722 Direct materials 22,300 $ 2,000 Direct labor* 1,960 23,520 4,704 392 Manufacturing overhead** $ 50,524 $ 4,352 Total cost * Direct labor calculated as follows: Hours per job Direct labor cost per hour II Total direct labor costs per job Job 721 840 $ 28 II $ 23,520 Job 722 70 28 = $ 1,960 ** Manufacturing overhead calculated as follows: Total direct labor Predetermined Manufacturing costs per job OH allocation rate = OH allocated Job 721 $ 23,520 X 20% = 4,704 Job 722 1,960 20% = $ 392 X i Data Table Predetermined Overhead Allocation Rate Activity Allocation Base Assembly Number of parts $ 0.40 Programming Number of direct labor hours 5.50 Testing Number of tests 140.00 X i Data Table Total Direct Materials Costs Total Number of Parts Total Direct Labor Hours Total Number of Tests Job Job 721 $ 22,300 2,200 840 36 Job 722 2,000 200 70 9