Problem #3: ABC SpeedyPrint prints leaflets, brochures and advertising materials

Question

Problem #3: ABC SpeedyPrint prints leaflets, brochures and advertising materials. The firm classifies its jobs as standard or special. The current accounting system uses two direct cost categories (DM and DL) anda single indirect cost pool which is allocated to standard and special jobs on the basis of printing machine hours. Management is worried about eroding margins on their standard jobs and is considering the adoption of an ABC system. The following data is available for 2014, the most recent year Number of printing jobs Price per job DM per job DL per job Printing machine hours per job Cost of prinintg machine operations Setup hours per job Total setup costs Total number of purchase orders Total purchase ordering costs Special 200 $750.00 $125.00 $100.00 10 Total 600 $390,000 $65,000 $52,000 6,800 $75,000 400 $100.00 $80.00 12 21bo $45,000 225 530 7 55 $20,000 Other indirect costs $64 000 Indirect costs 10 oot theoo t 2.jeee t 64,000

Explanation / Answer

Your part 1 seems correct so am answering only part 2 as

However, your part 2 is also correct. Below is the calculation.

Cost Cost Driver Allocation Ratio Standard Special Cost of printing 75000 6800 4800:2000 52941.17647 22058.82353 Set up Cost 45000 2600 1200:1400 20769.23077 24230.76923 Purchase Order Cost 20000 755 225:530 5960.264901 14039.7351 Other 64000 52000 32000:20000 39384.61538 24615.38462 Total Overhead 119055.2875 84944.71247 Overhead Cost per Job 297.6382188 424.7235624 DM 100 125 DL 80 100 Sales Pricee 600 750 Profit $122.36 $100.28

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