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The job costing system at Sheri's Custom Framing has five indirect cost pools (purchasing, material handling, machine maintenance, product inspection, and packaging). The company is
The job costing system at Sheri's Custom Framing has five indirect cost pools (purchasing, material handling, machine maintenance, product inspection, and packaging). The company is in the process of bidding on two jobs: Job 215, an order of 15 intricate personalised frames, and Job 325, an order of 6 standard personalised frames. The controller wants you to compare overhead allocated under the current simple 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 activity driver are as follows: Budgeted overhead Activity driver Budgeted quantity of $ activity driver Purchasing 35,000 Purchase orders 2,000 processed Material handling 43,750 Material moves 6,000 Machine 118,650 Machine-hours 10,500 maintenance Product inspection 9,450 Inspections 1,200 Packaging 19,950 Units produced 3,800 $226,800 Information related to Job 215 and Job 325 follows. Job 215 incurs more batch-level costs because it uses more types of materials that need to be purchased, moved and inspected relative to Job 325. Job 215 Job 325 Number of purchase orders 25 8 Number of material movers 10 4 Machine-hours 40 60 Number of inspections 9 3 Units produced 15 16
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