Workflow Systems specializes in servers for work-group, e-commerce and enterprise resource planning applications. The company-s original job cost system has two direct cost categories, direct materials and direct labor. Overhead is allocated to jobs at the single rate of $27 per direct labor hour. A task force headed by workflows CFO recently designed an ABC system with four activities. The ABC system retains the current systems two direct cost categories, its budgets only overhead costs for each activity

Activity	Allocation Base	Cost allocation rate
Materials handling	Number of parts	$1.10
Machine setup	Number of setups	$470.00
Assembling	Assembling hours	$120.00
Shipping	Number of shipments	$1280.00

Workflow systems has been awarded two new contracts that will be produced as job A and Job B. Budget data is as follows

	Job A	Job B
Number of parts	17,000	4,000
Number of setups	6	2
Number of assembling hours	1,700	400
Number of shipments	1	1
Total direct labor hours	9,900	880
Number of output units	100	20
Direct materials cost	$195,700	$100,640
Direct labor cost	$155,000	$25,000

Compute the product cost per unit for each job using the original costing system(with two direct cost categories and a single overhead allocation rate)

Suppose workflow systems adopts the ABC system, compute the product cost per unit for each job using ABC

Which costing system more accurately assigns to jobs the costs of the resources consumed to produce them? Explain.

A dependable company has offered to produce both jobs for workflow for $6,000 per output unit. Workflow may outsource Job A only, Job B only, or both jobs. Which course of action will workflow managers take if they base their decision on (a) the original system? (b) ABC system costs? Which course of action will yield more income? Explain