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Job 721 Job 722 Direct materials 20,600 $ 2,100 Direct labor* 3,300 24,900 6,972 924 Manufacturing overhead** $ 52,472 $ 6,324 Total cost * Direct

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Job 721 Job 722 Direct materials 20,600 $ 2,100 Direct labor* 3,300 24,900 6,972 924 Manufacturing overhead** $ 52,472 $ 6,324 Total cost * Direct labor calculated as follows: Hours per job Direct labor cost per hour Total direct labor costs per job Job 721 830 X $ 30 $ 24,900 Job 722 110 $ 30 3,300 ** Manufacturing overhead calculated as follows: Total direct labor Predetermined Manufacturing costs per job OH allocation rate OH allocated Job 721 24,900 28% II 6,972 Job 722 3,300 28% = $ 924 Predetermined Overhead Allocation Rate Activity Allocation Base Assembly Number of parts 0.60 Number of direct labor hours 7.00 Programming Testing Number of tests 100.00 Total Direct Materials Costs Total Number of Parts Total Direct Labor Hours Total Number of Tests Job Job 721 $ 20,600 2,200 830 36 Job 722 2,100 500 110 9 Requirement 1. Compute the total cost for each job using activity-based costing (ABC). The cost of direct labor is $30 per hour. Activity-based costing: Job 721 Job 722 Direct costs: Indirect 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. 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 resources 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). to the two jobs. Because reflects the way the jobs actually use the company's resources, takes into account assembling, programming, and testing activities when allocating overhead costs costs are closer to the true costs of completing each job. Requirement 3. If Phyllo 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

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