Question 4 (Additional question for student's self-practice) Gamma Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Gamma classifies its various printing jobs as standard jobs or special jobs. Gamma's simple job-costing system has two direct-cost categories (direct materials and direct labour) and a single indirect-cost pool. Gamma operates at capacity and allocates all indirect costs using printing machine-hours as the allocation base. Gamma 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. Gamma's 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. To see how activity-based costing would affect the costs of standard and special jobs, Gamma collects the following information for the fiscal year 2021 that just ended. Required a. Calculate the cost of a standard job and a special job under the simple costing system. b. Calculate the cost of a standard job and a special job under the activity-based costing system. c. Compare the costs of a standard job and a special job in requirements a and b. Why do the simple and activity-based costing systems differ in the cost of a standard job and a special job? d. How might Gamma use the new cost information from its activity-based costing system to better manage its business? Question 4 (Additional question for student's self-practice) Gamma Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Gamma classifies its various printing jobs as standard jobs or special jobs. Gamma's simple job-costing system has two direct-cost categories (direct materials and direct labour) and a single indirect-cost pool. Gamma operates at capacity and allocates all indirect costs using printing machine-hours as the allocation base. Gamma 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. Gamma's 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. To see how activity-based costing would affect the costs of standard and special jobs, Gamma collects the following information for the fiscal year 2021 that just ended. Required a. Calculate the cost of a standard job and a special job under the simple costing system. b. Calculate the cost of a standard job and a special job under the activity-based costing system. c. Compare the costs of a standard job and a special job in requirements a and b. Why do the simple and activity-based costing systems differ in the cost of a standard job and a special job? d. How might Gamma use the new cost information from its activity-based costing system to better manage its business
