2. 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 isin 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 compareoverhead 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 budgetedquantity of activity driver are as follows.Budgeted Quantityof Activity DriverBudgeted OverheadActivity DriverPurchasingMaterial handling$35,000Purchase orders processed2,00043,750Material moves5,000Machine maintenance118,650Machine-hours10,500Product inspectionPackagingInspectionsUnits produced9,4501,20019,9503,800$226,800Information related to Job 215 and Job 325 follows. Job 215 incurs more batch-level costsbecause it uses more types of materials that need to be purchased, moved, and inspectedrelative to Job 325. Job 215Job 325Number of purchase ordersNumber of material moves258.104Machine-hours4060Number of inspectionsUnits produced6.315口a. Compute the total overhead allocated to each job under a simple costing system, whereoverhead is allocated based on machine-hours.b. Compute the total overhead allocated to each job under an activity-based costing systemusing the appropriate activity drivers.c. Explain why Sheri's Custom Framing might favor the ABC job-costing system over thesimple job-costing system, especially in its bidding process.

Overhead is allocated based on machine-hours.…

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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.

Question

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.

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