Question

The job costing system at Shirley'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 17 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. E: (Click the icon to view the cost and driver data.) i (Click the icon to view the job data.) Read the requirements. Requirement 1. Compute the total overhead allocated to each job under a simple costing system, where overhead is allocated based on machine-hours. (Round interim and final answers to the nearest cent.) Job 215 Indirect cost allocated - simple costing system

Answer 1

Under simple costing system, overgead is allocated as follows :

Predetermined overgead rate = Total overhead cost / total machine hours

Predetermined overhead rate = $193,400/10,000 hours = $19.34 per hour

Job 215 =

Indirect cost allocated, Simole costing = 20 hours x $19.34 = $386.80

Job 325 =

Indirect cost allocated, Simole costing = 80 hours x $19.34 = $1,547.20