| Course | ACC 326 Managerial Accounting (ACC/326) |
|---|---|
| Week | 2 |
| Paper type | Cost classification and allocation paper |
| Length | about 1,052 words, 4 double-spaced pages plus title page and references |
| Format | APA 7 student paper |
| School | University of Phoenix |
| Program | BS in Accounting |
| Updated | September 2026 |
Free sample paper for ACC 326 Week 2
One Press, Two Kinds of Job: Classifying a Commercial Print Shop's Costs and Comparing a Plantwide Overhead Rate With Activity-Based Allocation
[Student Name]
University of Phoenix
ACC/326: Managerial Accounting
Week 2 Assignment
[Instructor Name]
[Date]
The print shop and all figures are composites written for a model paper; costing methods and research findings come from the sources listed.
A composite commercial print shop has three offset presses and a digital press. About 70% of its press hours go to long catalog and direct-mail runs for four large clients; the rest go to short custom jobs, such as event programs and menus, for about 300 small customers. The owner prices jobs at cost plus 25%, using a single overhead rate per machine hour. Large clients have begun to say the shop's prices are high, while small customers rarely complain. When the biggest customers think prices are too high and the smallest think they are fair, the cost system is worth a second look. This paper classifies the shop's costs, allocates its overhead two ways and compares the results.
Classifying the Shop's Costs
Direct costs can be traced to a job: the paper and ink used and the press operators' time on it. Indirect costs support many jobs and cannot be traced: press depreciation, the prepress technician who prepares plates and proofs, the scheduler, maintenance and utilities for the plant. Garrison et al. (2021) group direct materials, direct labor and manufacturing overhead as product costs, which are held in inventory until the job is delivered. Sales commissions, the office manager's salary and advertising are period costs, expensed in the month incurred.
Cost behavior is a second classification. Paper and ink are variable, rising in proportion to the number of sheets printed. Press depreciation and plant rent are fixed within the shop's relevant range of one to two shifts. Electricity is mixed: a base charge of about $1,800 a month plus roughly $4 per press hour. Knowing the split lets the owner estimate what an extra shift would cost.
Traditional Allocation
The shop budgets $540,000 of manufacturing overhead for the year and 12,000 machine hours, a predetermined rate of $45 per machine hour. Consider two jobs. Job A is a catalog run of 80,000 copies that uses 60 machine hours, one setup and one proof. Job B is a program for a charity gala, 800 copies, using 3 machine hours, two setups because of a late change and four rounds of proofs. Under the plantwide rate, Job A receives $2,700 of overhead and Job B receives $135.
Activity-Based Allocation
Overhead is not all driven by press hours. After interviews with the prepress technician and scheduler, the owner divided overhead into three pools. Setup costs, including plate making, press washing and make-ready waste, total $180,000 for an estimated 2,400 setups, or $75 per setup. Proofing and customer changes cost $90,000 for 3,000 proof rounds, or $30 per round. The remaining $270,000, press depreciation, maintenance and power, is driven by machine hours at $22.50 per hour.
Job A now receives one setup at $75, one proof at $30 and 60 hours at $22.50, or $1,455 of overhead. Job B receives two setups at $150, four proofs at $120 and 3 hours at $67.50, or $337.50. Cooper and Kaplan (1988) argued that volume-based allocation loads too much cost on long, simple runs and too little on short, complex ones, because it ignores activities like setups, and the print shop's two jobs show the pattern.
What the Difference Means
Under the traditional rate, Job A carried $1,245 more overhead than its activities caused, and Job B carried $202.50 less. At a 25% markup, the catalog client paid about $1,556 too much on this one job, while the gala paid about $253 too little. Across hundreds of short jobs, the shop has been subsidizing small customers with margins taken from its largest clients, which explains both clients' reactions.
Checking the Pools Against the Budget
A useful test of any activity-based system is whether the pools add back to the total overhead. Setups at $180,000, proofing at $90,000 and press costs at $270,000 total $540,000, the same budget used for the plantwide rate. Activity-based costing does not change how much overhead the shop has; it changes which jobs carry it. The test also exposes estimates that need work. The scheduler's count of 2,400 setups came from last year's job tickets, but the proof count of 3,000 rounds was an estimate from the prepress technician, since proofs were not recorded. For the coming year, the shop will log each proof round in its job system, so the rate can be checked against actual activity at year end.
Customer Profitability
The same data can be used to rank customers rather than jobs. When the owner applied the three rates to last year's job tickets, the four large clients together generated about 62% of revenue and 74% of the shop's margin, while roughly 90 of the smallest customers, those who ordered one or two short jobs with many proof rounds, lost money after overhead. That does not mean those customers should be dropped. Some bring referrals, and several are nonprofits the owner supports by choice. It does mean the owner can now make that choice knowingly, rather than having the cost system make it silently.
Limits of Each Method
Activity-based costing is not free. Someone must count setups and proof rounds, and the pools themselves are estimates. Kaplan and Anderson (2004) noted that early activity-based systems were expensive to maintain and proposed time-driven versions based on how long each activity takes. For a shop this size, three pools are enough; more would cost more than the extra accuracy is worth. The traditional rate remains useful for quick quotes on standard jobs where setups and proofs follow a normal pattern.
Recommendation
The owner should adopt the three-pool system for quoting, add a setup charge and a per-round proof charge to small jobs and review catalog pricing with the four large clients. A minimum order charge would also recover setup costs on very small runs. The owner should recheck the pool rates each year, since new equipment or a change in the customer mix would change them.
Conclusion
Classifying costs showed which costs follow volume and which follow other activities. Allocating overhead with a single machine-hour rate made long runs look expensive and short runs look cheap. Three activity pools, with drivers the staff could count, corrected the picture and gave the owner a reason to change prices on both kinds of job.
References
Cooper, R., & Kaplan, R. S. (1988). Measure costs right: Make the right decisions. Harvard Business Review, 66(5), 96-103.
Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2021). Managerial accounting (17th ed.). McGraw Hill.
Kaplan, R. S., & Anderson, S. R. (2004). Time-driven activity-based costing. Harvard Business Review, 82(11), 131-138.
What the ACC 326 Week 2 instructions ask
The ACC 326 Week 2 task commonly asks students to define and apply cost classifications and to explain or calculate cost allocation. Prompts may ask students to classify a list of costs for a business, explain the difference between product and period costs, describe fixed, variable and mixed costs and compare traditional overhead allocation with activity-based costing. Some sections provide a short case with numbers and ask for predetermined overhead rates and cost per unit or job. The written part explains what the calculations mean for pricing or decisions. Expect a short paper or a combined calculation and explanation, with textbook and professional sources cited in APA style and all figures shown so the reader can follow them.
How this ACC 326 Week 2 example is built
A print shop fits the week because two very different kinds of job share the same equipment, which is the situation where a single overhead rate distorts cost the most. Costs are first classified in prose with examples from the shop, including one mixed cost split into fixed and variable parts. The overhead calculation is then done twice, once with a plantwide machine-hour rate and once with three activity pools for setups, press time and customer proofs. Two sample jobs, a long catalog run and a short custom run, are costed both ways. The paper interprets the gap, ties it to pricing and closes by weighing the extra cost of activity-based costing against its benefit.
ACC 326 Week 2 grading rubric: where the points go
Marks in the cost concepts week tend to go to correct classification, correct calculation and clear explanation of why allocation matters. Faculty check that product and period costs are separated, that fixed and variable behavior is described within a relevant range and that overhead rates are computed from budgeted figures. Where activity-based costing appears, cost drivers should be logical and the comparison should show which products were over- or under-costed. Interpretation, especially links to pricing and decisions, separates strong papers from calculation sheets. Clear presentation of figures, consistent totals, organized headings and APA citations complete the rubric, and arithmetic errors that change a conclusion are penalized more heavily than small rounding.
ACC 326 Week 2 help: mistakes to avoid
A frequent ACC 326 Week 2 slip is calling every cost that changes over a year variable; cost behavior refers to changes with activity, not with time. Tie each classification to a driver such as units or hours. Another is treating selling and administrative costs as product costs, which inflates inventory. Students also compute an activity-based rate but never compare it with the traditional result, missing the point of the exercise. Show both and explain the difference. Choose cost drivers that plausibly cause the cost; setups drive setup cost, not machine hours. Watch rounding in rates. Finally, say what a manager should do with the new figures, such as repricing short jobs or setting a minimum order.
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ACC 326 Week 2 questions, answered
What does ACC 326 Week 2 usually ask for?
It usually covers cost concepts and cost allocation: classifying costs as direct or indirect, variable or fixed and product or period, and allocating overhead with a traditional rate or activity-based costing.
Where can I find a free ACC 326 Week 2 sample paper?
The print shop example here is complete, with both allocation methods worked and margin notes on each step, and anyone can read it. We will also write your first cost allocation paper around your own case free of charge.
What is the difference between product costs and period costs?
Product costs are the costs of making goods, direct materials, direct labor and manufacturing overhead, and are held in inventory until sold; period costs, such as selling and administrative costs, are expensed when incurred.
What is activity-based costing?
It assigns overhead to products through several activity cost pools, each with its own driver, such as setups or inspections, instead of one plantwide rate.
When does a single overhead rate distort product cost?
When products use overhead resources in very different proportions, for example short runs that need many setups compared with long runs that need few.
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