Question - The job costing system at Smith's Custom Framing has five indirect cost pools ( purchasing, material handling, machine maintenance, product inspection, and packaging). The company is in the process of bidding on two jobs; Job 215, an order of 15 intricate personalized frames, and Job 325, an order of 6 standard personalized frames. The controller wants you to compare overhead allocated under the current simple job- costing system and a newly- designed activity- based job- costing system. Total budgeted costs in each indirect cost pool and the budgeted quantity of activity driver are as follows:

Budgeted Overhead Activity Driver Budgeted Quantity of Activity Driver

Purchasing $ 70,000 Purchase orders processed 2,000

Material handling 87,500 Material moves 5,000

Machine maintenance 237,300 Machine- hours 10,500

Product inspection 18,900 Inspections 1,200

Packaging 39,900 Units produced 3,800

$ 453,600

Information related to Job 215 and Job 325 follows. Job 215 incurs more batch- level costs because it uses more types of materials that need to be purchased, moved, and inspected relative to Job 325.

Job 215 Job 325

Number of purchase orders 25 8

Number of material moves 10 4

Machine- hours 40 60

Number of inspections 9 3

Units produced 15 6

1. Compute the total overhead allocated to each job under a simple costing system, where overhead is allocated based on machine- hours.

2. Compute the total overhead allocated to each job under an activity- based costing system using the appropriate activity drivers.

3. Explain why Smith's Custom Framing might favor the ABC job- costing system over the simple job-costing system, especially in its bidding process.