Printing Hub uses a normal absorption costing system with a plant-wide overhead rate based on machine hours. Recently the marketing manager, Eloise Tan, submitted an unsuccessful tender for a large printing job. The company uses a cost-plus mark-up for quoting, and Eloise is convinced that she lost the tender because the cost of the job was overstated. She complains to the managing director, Andrew Wong: "We lost this job because our costing system overstated it cost. As a large job it involved a lot of machine hours, which meant a lot of applied overhead. Yet this job didn't require a lot of overhead support. The job could have been scheduled as a single production run, with only setup and set-down. It would have required little warehousing and material handling. We have got to do something about our costing system.

Required. Q34. The problem with the current costing system has beer well explained by Eloise. Would this problem be solved if the company switched from absorption to variable costing for pricing? Explain your view. (5 marks)

Q35. If you were a cost consultant to Printing Hub, what else would you like to find out before deciding the current costing system has systematically miscalculated job costs for our costing system.