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Laserprint Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Laserprint classifies its various printing jobs as standard jobs or special jobs. Laserprint's simple job-costing system has two direct-cost categories (direct materials and direct labor) and a single indirect-cost pool. Laserprint operates at capacity and allocates all indirect costs using printing machine-hours as the allocation base. Laserprint 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. Laserprint'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, Laserprint collects the following information for the fiscal year 2013 that just ended Standard Cause-and-Effect Relationship Between Job Total Allocation Base and Activity Cost 1,000 Number of printing jobs Price per job $ 1,300 Cost of supplies per job $ 210 Direct labor cost per job $ 190 Printing machine-hours per job Cost of printing machine operations Specia 1 Job 500 $ 1,700 $ 300 $ 210 10 101 $ 345,000 Indirect costs of operating printing machines increase with printing machine hours 7 9 Setup-hours per job Setup costs Total number of purchase orders Purchase order costs 380 $ 293,250 Indirect setup costs increase with setup-hours 480 $ 26,230 Indirect purchase order costs increase with number of purchase orders $ 22,000 $ 27,000 Design costs are allocated to standard and special jobs based on a special study of the design department Design costs $ 5,000 Marketing costs as a percentage of revenues 6% 6% $ 129,000 $ 120,950 Demand for administrative resources Administration costs increases with direct labor costs 1. Calculate the cost of a standard job and a special job under the simple costing system. 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 and a special job? 4. How might Laserprint use the new cost information from its activity-based costing system to better manage its business

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