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Unformatted text preview: imple – ABC) Standard Job $1,051.70 $ 947.14 $ 104.56 Special Job $1,121.70 $1,330.72 $ (209.02) Relative to the ABC system, the simple costing system overcosts standard jobs and undercosts special jo bs. Both types o f jobs need 10 machine hours per job, so in the simple system, they are each allocated $671.70 in indirect costs. But, the ABC study reveals that each standard jo b consumes less of the indirect resources such as setups, purchase orders, and design costs than a special jo b, and this is reflected in the higher indirect costs allocated to special jo bs in the ABC system. 4. Quikprint can use the informat ion revealed by the ABC system to change its pricing based on the ABC costs. Under the simple system, Quikprint was making a gross margin o f 12% on each standard jo b (($1,200 – $1,051.70) ¸ $1,200) and 25% on each special jo b (($1,500 – $1,121.70) ¸ $1,500). But, the ABC system reveals that it is actually making a gross margin o f about 21% (($1,200 – $947) ¸ $1,200) on each standard job and about 11% (($1,500 – $1,331) ¸ $1,500) on each special jo b. Depending on the market compet it iveness, Quikprint may eit her want to reprice the...
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- Spring '10
- Cost Accounting