Application of Overhead Progressive Painting Company (PPC) is a successful company i...

Application of Overhead Progressive Painting Company (PPC) is a successful company in commercial and residential painting. PPC has a variety of jobs: new construction, repair and repainting existing structures, and restoration of very old buildings and homes. The company is known for the quality and reliability of its work, and customers expect to pay a little more for those benefits. One of the company’s core values is sustainability, and it insists on using the most environmentally friendly paints and materials in its work; it has refused jobs where the client required a more environmentally harmful paint than PPC thought was appropriate for the application. The company’s commitment to sustainability has lost PPC some jobs, but it has also attracted a loyal and growing customer base.

The company uses job costing and applies overhead on the basis of direct labor-hours. Overhead for the company consists of painting equipment, trucks, supervisory labor, supplies, and administrative operation costs. The total budgeted costs for the year are shown below.

PPC has just completed two jobs:

Required

1. Determine the total cost of each job.

2. The Prevette job required oil-based paint and the clean-up after the job required the use of chemicals that, after use, had to be disposed of in an environmentally appropriate way. In contrast, the Harmon job required water-based paint and the job clean-up was very quick and simple and involved no harmful chemicals. Does the job costing in part 1 above capture the difference between the two jobs in regard to the types of paint used? Do you think the costing system should capture this difference, if any, and if so, how do you think the costing system should be changed?