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Fullhue simple job-costing system has two direct-cost categories (direct materials and direct labor) and a single indirect-cost pool Fullhue operates at capacity and allocates all indirect costs using printing machine-hours as the allocation base Fullhue 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 Fullhue 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.

A B D E Cause-and-Effect Relationship Between Allocation Base and Activity Cost Standard Job 1 Special Job Total 1,600 800 $ 1,100 $ 1,600 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 $ 100 $ 290 $ 120$ 220 10 10 Indirect costs of operating printing machines increase with printing $ 696,000 machine-hours 7 Cost of printing machine operations 8 Setup-hours per job 3 51 Indirect setup costs increase with $ 281,600 setup-hours 9 Setup costs 10 Total number of purchase orders 330 430 11 Purchase order costs $ Indirect purchase order costs increase 28,120 with number of purchase orders Design costs are allocated to standard and special jobs based on a special 34,000 study of the design department 9,000 $ 25,000 $ 12 Design costs Marketing costs as a percentage of 13 revenues 6% 6% $ 182,400 Demand for administrative resources increases with direct labor costs 14 Administration costs $ 169,280 Fullhue Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Fullhue classifies its various printing jobs as standard jobs or special jobs. (Click the icon to view additional information.) To see how activity-based costing would affect the costs of standard and special jobs, Fullhue collects the following information for the fiscal year 2017 that just ended. (Click the icon to view the information.) Read the requirements. 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 Fullhue Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Fullhue classifies its various printing jobs as standard jobs or special jobs. Click the icon to view additional information.) To see how activity-based costing would affect the costs of standard and special jobs, Fullhue collects the following information for the fiscal year 2017 that just ended. |(Click the icon to view the information.) Read the requirements. 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.) II ABC Allocation rate Machine operations Setups I 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.) 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 Job Job ABC Costing System Cost of supplies Direct manufacturing labor costs Indirect costs allocated: Machine operations Setups Purchase orders Design Marketing Administration Total costs Cost of each job Requirement 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? Standard jobs cost under the simple costing sytem than under the activity-based costing system. Relative to the ABC system, the under the simple costing system than under the activity-based costing system. Special jobs cost standard jobs and special jobs. simple costing system Requirement 4. How might Fullhue use the new cost information from its activity-based costing system to better manage its business? O A. Under the simple system, Fullhue was making a gross margin of 27% on each standard job and 32% on each special job. But, the ABC system reveals that it is actually making a gross margin of about 33% on each standard job and about 24% on each special job. Depending on the market competitiveness, Fullhue may either want to reprice the different types of jobs, or, it may choose to market special jobs more aggressively than before. B. Under the simple system, Fullhue was making a gross margin of 32% on each standard job and 27% on each special job. But, the ABC system reveals that it is actually making a gross margin of about 24% on each standard job and about 33% on each special job. Depending on the market competitiveness, Fullhue may either want to reprice the different types of jobs, or, it may choose to market special jobs more aggressively than before. C. Under the simple system, Fullhue was making a gross margin of 27% on each standard job and 32% on each special job. But, the ABC system reveals that it is actually making a gross margin of about 33% on each standard job and about 24% on each special job. Depending on the market competitiveness, Fullhue may either want to reprice the different types of jobs, or, it may choose to market standard jobs more aggressively than before. D. None of the above. The new cost information would have no impact on how the company manages its business. Choose from any list or enter any number in the input fields and then continue to the next question. Requirement 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? Standard jobs cost under the simple costing sytem than under the activity-based costing system. Relative to the ABC system, the under the simple costing system than under the activity-based costing system. Special jobs cost standard jobs and special jobs. simple costing syste less Requirement 4. Ho e use the new cost information from its activity-based costing system to better manage its business? more O A. Under the simple system, Fullhue was making a gross margin of 27% on each standard job and 32% on each special job. But, the ABC system reveals that it is actually making a gross margin of about 33% on each standard job and about 24% on each special job. Depending on the market competitiveness, Fullhue may either want to reprice the different types of jobs, or, it may choose to market special jobs more aggressively than before. B. Under the simple system, Fullhue was making a gross margin of 32% on each standard job and 27% on each special job. But, the ABC system reveals that it is actually making a gross margin of about 24% on each standard job and about 33% on each special job. Depending on the market competitiveness, Fullhue may either want to reprice the different types of jobs, or, it may choose to market special jobs more aggressively than before. C. Under the simple system, Fullhue was making a gross margin of 27% on each standard job and 32% on each special job. But, the ABC system reveals that it is actually making a gross margin of about 33% on each standard job and about 24% on each special job. Depending on the market competitiveness, Fullhue may either want to reprice the different types of jobs, or, it may choose to market standard jobs more aggressively than before. D. None of the above. The new cost information would have no impact on how the company manages its business. Choose from any list or enter any number in the input fields and then continue to the next question. Requirement 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? Standard jobs cost under the simple costing sytem than under the activity-based costing system. Relative to the ABC system, the under the simple costing system than under the activity-based costing system. Special jobs cost standard jobs and special jobs. simple costing system Requirement 4. How n new cost information from its activity-based costing system to better manage its business? overcosts O A. Under the simp undercosts as making a gross margin of 27% on each standard job and 32% on each special job. But, the ABC system reveals that it is actually making a gross margin of about 33% on each standard job and about 24% on e ending on the market competitiveness, Fullhue may either want to reprice the different types of jobs, or, it may choose to market special jobs more aggressively than before. B. Under the simple system, Fullhue was making a gross margin of 32% on each standard job and 27% on each special job. But, the ABC system reveals that it is actually making a gross margin of about 24% on each standard job and about 33% on each special job. Depending on the market competitiveness, Fullhue may either want to reprice the different types of jobs, or, it may choose to market special jobs more aggressively than before. C. Under the simple system, Fullhue was making a gross margin of 27% on each standard job and 32% on each special job. But, the ABC system reveals that it is actually making a gross margin of about 33% on each standard job and about 24% on each special job. Depending on the market competitiveness, Fullhue may either want to reprice the different types of jobs, or, it may choose to market standard jobs more aggressively than before. D. None of the above. The new cost information would have no impact on how the company manages its business. Choose from any list or enter any number in the input fields and then continue to the next