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2. Swagg Jewelry Corporation manufactures custom Jewelry. In the past. Swagg has been using a traditional overhead allocation system based solely on direct labor-hours. Sensing
2. Swagg Jewelry Corporation manufactures custom Jewelry. In the past. Swagg has been using a traditional overhead allocation system based solely on direct labor-hours. Sensing that this system was distorting costs and selling prices, Swagg has decided to switch to an activity-based costing system using three activity cost pools. Information on these activity cost pools are as follows: Activity Cost Pool Labor Related Machine Related Quality Control Total Cost $42,000 $58,000 $15,000 Total Activity 8,000 direct labor hours 12,500 machine hours 800 inspections I Job #309 incurred $900 of direct material, 30 hours of direct labor at $40 per hour, 80 machine hours, and 5 inspections. Required: a. What is the cost of the job under the activity-based costing system? b. Relative to the activity-based costing system, would Job #309 have been overcosted or undercosted under the traditional system and by how much
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