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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 Total Cost Labor Related Machine Related Quality Control $ 42,000 $58,000 $15,000 Total Activity 8,250 direct labor hours 12,000 machine hours 810 inspections Job #309 incurred $950 of direct material, 35 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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