Urban Elite Cosmetics has used a traditional cost accounting system to apply quality-control costs uniformly to all products at a rate of 14.5 percent of direct-labor cost. Monthly direct-labor cost for Satin Sheen makeup is $27,500. In an attempt to more equitably distribute quality-control costs, management is considering activity-based costing. The monthly data shown in the following chart have been gathered for Satin Sheen makeup

Required:
1. Calculate the monthly quality-control cost to be assigned to the Satin Sheen product line under each of the following product-costing systems. (Round to the nearest dollar.)

a. Traditional system, which assigns overhead on the basis of direct-labor cost.

b. Activity-based costing.
2. Does the traditional product-costing system overcost or undercost the Satin Sheen product line with respect to quality-control costs? By what amount?

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Activity Cost Pool Incoming material inspection. In-process inspection Product certification Cost Driver Type of material. Number of units Per order Pool Rates $11.50 per type......... .14 per unit. 77.00 per order........ Quantity of Driver for Satin Sheen 12 types 17,500 units 25 orders