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2. 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 personalized frames, and Job 325, an order of 6 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 activity driver are as follows. Budgeted Quantity of Activity Driver Budgeted Overhead Activity Driver Purchasing $ 35,000 Purchase orders processed 2,000

2. 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 personalized frames, and Job 325, an order of 6 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 activity driver are as follows. Budgeted Quantity of Activity Driver Budgeted Overhead Activity Driver Purchasing $ 35,000 Purchase orders processed 2,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2. 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 personalized frames, and Job 325, an order of 6 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 activity driver are as follows. Budgeted Quantity of Activity Driver Budgeted Overhead Activity Driver Purchasing Material handling $35,000 Purchase orders processed 2,000 43,750 Material moves 5,000 Machine maintenance 118,650 Machine-hours 10,500 Product inspection Packaging Inspections Units produced 9,450 1,200 19,950 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.
Transcribed Image Text:2. 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 personalized frames, and Job 325, an order of 6 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 activity driver are as follows. Budgeted Quantity of Activity Driver Budgeted Overhead Activity Driver Purchasing Material handling $35,000 Purchase orders processed 2,000 43,750 Material moves 5,000 Machine maintenance 118,650 Machine-hours 10,500 Product inspection Packaging Inspections Units produced 9,450 1,200 19,950 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 Number of material moves 25 8. 10 4 Machine-hours 40 60 Number of inspections Units produced 6. 3 15 口 a. Compute the total overhead allocated to each job under a simple costing system, where overhead is allocated based on machine-hours. b. Compute the total overhead allocated to each job under an activity-based costing system using the appropriate activity drivers. c. Explain why Sheri's Custom Framing might favor the ABC job-costing system over the simple job-costing system, especially in its bidding process.
Transcribed Image Text:Job 215 Job 325 Number of purchase orders Number of material moves 25 8. 10 4 Machine-hours 40 60 Number of inspections Units produced 6. 3 15 口 a. Compute the total overhead allocated to each job under a simple costing system, where overhead is allocated based on machine-hours. b. Compute the total overhead allocated to each job under an activity-based costing system using the appropriate activity drivers. c. Explain why Sheri's Custom Framing might favor the ABC job-costing system over the simple job-costing system, especially in its bidding process.
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