Question

Aniline simple​ job-costing system has two​ direct-cost categories​ (direct materials and direct​ labor) and a single​ indirect-cost pool.

Aniline operates at capacity and allocates all indirect costs using printing​ machine-hours as the allocation base.

Aniline 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.

Aniline ABC system would have the same​ direct-cost categories as its simple 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.

Date Table: Explain this problem step by step. Thank you.

				Cause-and-Effect Relationship Between
	Standard Job	Special Job	Total	Allocation Base and Activity Cost
Number of printing jobs	1,400	700
Price per job	$1,400	$2,200
Cost of supplies per job	$75	$230
Direct labor costs per job	$130	$250
Printing machine-hours per job	10	10
Cost of printing machine operations			$462,000	Indirect costs of operating printing machines
				increase with printing machine-hours
Setup-hours per job	7	9
Setup costs			$402,500	Indirect setup costs increase with setup-hours
Total number of purchase orders	360	460
Purchase order costs			$24,600	Indirect purchase order costs increase with
				number of purchase orders
Design costs	$12,000	$20,000	$32,000	Design costs are allocated to standard and special
				jobs based on a special study of the design department
Marketing costs as a percentage of revenues	5%	5%	$175,000
Administration costs			$160,650	Demand for administrative resources increases
				with direct labor costs

Calculate the cost of a standard job and a special job under the simple costing system. ​(Round interim calculations to three decimal​ places, X.XXX and your final answers to the nearest​ cent, X.XX.)

	Standard
Simple Costing System	Job
Cost of supplies per job	$75.00
Direct manufacturing labor cost per job	130.00
Indirect cost allocated to each job	598.45
Total costs	$803.45

Special

Job

$230.00

250.00

598.45

$1,078.45

Requirement 2. Calculate the cost of a standard job and a special job under the​ activity-based costing system.

Begin by calculating the allocation rates for the following activities. ​(Abbreviations used:​ $ =​ Dollar, DM​ = Direct​ manufacturing, Qty.​ = Quantity. Round the allocation rates to the nearest cent for all activities except​ Administration; round Administration to five decimal​ places, X.XXXXX.)

	Total cost of activity	/	Total qty consumed	=	ABC Allocation rate
Machine operations	$462,000	/	21,000	=	$22.00	per machine-hour

Setups

$402,500

/

16,100

=

$25.00

per setup-hour

Purchase orders

$24,600

/

820

=

$30.00

per purchase order

Administration

$160,650

/

$357,000

=

$0.45000

per $ of DM labor cost

​Now, completing the table for total costs of standard​ jobs, special jobs and then cost per job for each type of job. ​(Round your answers to the nearest whole dollar except cost per job. Round cost per job to the nearest​ cent.)

	Standard
ABC Costing System	Job
Cost of supplies	$105,000
Direct manufacturing labor costs	182,000
Indirect costs allocated:
Machine operations	308,000
Setups	245,000
Purchase orders	10,800
Design	12,000
Marketing	98,000
Administration	81,900
Total costs	$1,042,700

Special
Job
$161,000
175,000
154,000
157,500
13,800
20,000
77,000
78,750
$837,050

Cost of each job

$744.79

$1,195.79

Answer 1

1. Solution for Aniline: Standard Job

The above is the activity based costing company: Total indirect costs = $462,000

Total machine hours: 10 Hours = 1400$\ast$10 = 14,000 hours

Indirect cost rate per machine hour: $462000/14000 = $33 per machine hour

2. Special Job:

Total indirect costs: $462,000

Total machine hours: 10 hours = $2,200*10 = 22,000 hours

Indirect cost rate per machine hour: $462,000/22,000 = $21 per machine hour

3. Simple Costing System:

Simple Costing System Standard Job Special Job $75 | $230 $130 $250 $5,984.50 $5,984.50 Cost of supplies per job Direct labour cost per job Indirect Cost allocated to each job (10 machine hours* cost for each job) Total Costs $6,189.50 $6,464.50

Requirement 2:

Requirement 2 Activity based costing system Activity [1] Machine operations (3,08,000*10) & (1,57,500*10) Cost driver [2] Standard Job [3] Special Job [4] T otal cost of activity Allocation Rate [5] Machine hours 30,80,000 15,70,000 102,300,000 $22 Set ups (245000*25) & (13,800*25) Set up hours 61,25,000 345,000 161,750,000 $25 $30 Purchase Orders Design Marketing Administration No of purchase orders % of revenue Direct labour cost 10,800 $98,000 81,900 20,000 77,000 78,750 924,000 175,000 2,902,331,250 $0.45 Revenue from Standard jobs $391,160 Direct labour costs of standard jobs 16,016,000 (10,800*$30) Revenue from Special jobs $200,025 Direct labour costs of pecial jobs 8,190,000 (20,000*$30)