Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)

16th Edition

ISBN: 9780134475585

Author: Srikant M. Datar, Madhav V. Rajan

Publisher: PEARSON

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Textbook Question

Chapter 5, Problem 5.25E

Activity-based costing, service company. Speediprint Corporation owns a small printing press that prints leaflets, brochures, and advertising materials Speediprint classifies its various printing jobs as standard jobs or special jobs. Speediprint’s simple job-costing system has two direct-cost categories (direct materials and direct labor) and a single indirect-cost pool. Speediprint operates at capacity and allocates all indirect costs using printing machine-hours as the allocation base.

Speediprint 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. Speediprint’s 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. To see how activity-based costing would affect the costs of standard and special jobs. Speediprint collects the following information for the fiscal year 2017 that just ended.

Chapter 5, Problem 5.25E, Activity-based costing, service company. Speediprint Corporation owns a small printing press that

1. Calculate the cost of a standard job and a special job under the simple costing system.

Required

2. Calculate the cost of a standard job and a special job under the activity-based costing system.
3. Compare the costs of a standard job and a special job in requirements 1 and 2. Why do the simple and activity-based costing systems differ in the cost of a standard job and a special job?
4. How might Speediprint use the new cost information from its activity-based costing system to better manage its business?

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Chapter 5, Problem 5.24E

Chapter 5, Problem 5.26E

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Chapter 5 Solutions

Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)

Ch. 5 - What is broad averaging, and what consequences can...Ch. 5 - Why should managers worry about product...Ch. 5 - What is costing system refinement? Describe three...Ch. 5 - What is an activity-based approach to designing a...Ch. 5 - Describe four levels of a cost hierarchy.Ch. 5 - Why is it important to classify costs into a cost...Ch. 5 - What are the key reasons for product cost...Ch. 5 - Prob. 5.8Q Ch. 5 - Department indirect-cost rates are never...Ch. 5 - Prob. 5.10Q

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