PART C.

The job costing system at Cya's Custom Framing has five indirect-cost pools (purchasing, materials handling, machine maintenance, product inspection and packaging). The company is in the process of bidding on two jobs: Job CASS, an order of _17_ personalised frames, and Job JAZZ, an order of _5. standard frames. The CFO wants you to compare overhead allocated under the current job-costing system and a newly designed activity-based job-costing system. Total budgeted costs in each indirect-cost pool and the budgeted quantity of each activity driver are as follows.

Budgeted Quantity of Activity-cost

	Budgeted Overhead	Activity-cost Driver	Driver
Purchasing	34 400	Purchase orders	1 800
		processed
Material handling Machine maintenance	57 600	Material moves	6 400
	121 000	Machine-hours	12 100
Product inspection	8 100	Inspections	2 000
Packaging	15 900	Units produced	3 900
	237 000

Information related to jobs CASS and JAZZ follows. Job CASS incurs more batch-level costs because relative to job JAZZ, it uses more types of materials that need to be purchased, moved and inspected.

Job CASS Job JAZZ

Number of purchase orders. 25 11

Number of materials moves 22 7

Machine-hours 36 85

Number of inspections 12 3

Units produced 20 7

Required

1. Calculate the total overhead allocated to each job under a costing system where overhead is allocated based on machine-hours.

[5 marks]

2. Calculate the total overhead allocated to each job under an activity-based costing system using the appropriate activity drivers.

[5 marks]

3. Explain why Cya's Custom Framing might favour the ABC job-costing system over the traditional job-costing system, especially in its bidding process.

[5 marks]