Acc315 Cost Accounting: 5-21 Quikprint Corporation owns a small printing press

Acc315 Cost Accounting 
5-21 Activity-based costing, service company. 
Quikprint Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Quikprint classifies its various printing jobs as standard jobs or special jobs. Quikprint's simple job-costing system has two direct cost categories (direct materials and direct labor) and a single indirect cost pool. Quikprint operates at capacity and allocates all indirect costs using printing machine-hours as the allocation base. 
Quikprint 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. 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, Quikprint collects the following information for the fiscal year 2009 that just ended. 
Standard Job Special Job Total 
Number of printing jobs 400 200 
Price per job 1,200 1,500 
Cost of supplies per job 200 250 
Direct labor costs per job 180 200 
Printing machine hrs pr job 10 10 
Cost of printing machine operations 150,000 Indirect costs of operating printing machines increase with printing machine hours 
Setup hours per job 4 7 
Setup cost 90,000 Indirect setup cost increase with setup hours 
Number of purchase orders 400 500 
Purchase order costs 36,000 Indirect purchase order costs increase with number of purchase orders 
Total design costs 8,000 32,000 40,000 Design costs are allocated to standard and special jobs based on a special study of the design department 
Marketing costs 5% 5% 39,000 
of sales price of sales price 
Administration costs 48,000 Demand for administrative resources increase with direct manufacturing labor costs

Required: 
1. Calculate the cost of a standard job and a special job under the simple costing system 
2. Calculate the cost of a standard job and a special job under the activity based costing system 
3. Compare the costs of a stand job and a special job in requirement 1 and 2. Why do the simple and activity based costing systems differ in the cost of a standard job and a special job? 
4. How might Quikprint use the new cost information from its activity based costing system to better manage its business?
Powered by