The job-costing system at Sharon'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 personalized frames, and Job 325, an order of six standard personalized 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 each activity driver are as follows. (Click the icon to view the cost and driver data.) (Click the icon to view the job data.) Read the requirements. Requirement 1. Compute the total overhead allocated to each job under a simple costing system, where overhead is allocated based on machine-hours. Begin by calculating the overhead rate under the simple costing system. First select the formula, then enter the applicable amounts and calculate the rate. (Round yo answer to the nearest cent. Abbreviations used: bgt. = budgeted, mach. = machine, mat. = material, purch. = purchase, qty. = quantity.) Budgeted overhead rate Simple costing system Now calculate the total overhead allocated to each job under a simple costing system. (Round your answer to the nearest cent.) Simple costing system Job 215 Job 325 Indirect cost allocated Requirement 2. Compute the total overhead allocated to each job under an activity-based costing system using the appropriate activity drivers. (Round the allocation rates to three decimal places, X.XXX. Abbreviations used: bgt. = budgeted, mach. = machine, maint. = maintenance, mat. = material, purch. = purchase, qty = quant prod. = produced.) ABC allocation rate Purchasing Mat. handling Mach. maint. = Inspection Packaging Now calculate the total overhead allocated to Job 215 and Job 325 under an activity-based costing system. (Round interim calculations to three decimal places and your final answers to the nearest cent.) ABC costing system Job 215 Job 325 Overhead costs allocated: Purchasing Materials handling Machine maintenance Inspection Packaging Total costs Requirement 3. Explain why Sharon's Custom Framing might favor the ABC job-costing system over the simple job-costing system, especially in its bidding process. (Select all choices that apply.) Budgeted Overhead Activity Driver Budgeted Quantity of Activity Driver 2,200 39,600 Purchased orders processed 29,400 Material moves 4,900 Purchasing Material handling Machine maintenance Product inspection 160,000 Machine-hours 10,000 Inspections 1,700 11,900 24,500 Packaging Units produced 3,500 265,400 Total 1 Comnute the total overhead allocated to each job under a simple costing Requirements cum, where overhead is allocated based on machine-hours. 2. Compute the total overhead allocated to each job under an activity-based costing system using the appropriate activity drivers. 3. Explain why Sharon's Custom Framing might favor the ABC job-costing system over the simple job-costing system, especially in its bidding process. 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 20 11 Number of purchase orders Number of material moves Machine-hours 14 5 40 60 11 6 Number of inspections Units produced 15 6
