Exercise 16-11 Health 'R Us, Inc., uses a traditional product costing system to assign overhead costs uniformly to all its packaged multigrain products. To meet Food and Drug Administration requirements and to assure its customers of safe, sanitary, and nutritious food, Health 'R Us engages in a high level of quality control. Health 'R Us assigns its quality-control overhead costs to all products at a rate of 17% of direct labor costs. Its direct labor cost for the month of June for its low-calorie breakfast line is $65,000. In response to repeated requests from its financial vice president, Health 'R Us's management agrees to adopt activity-based costing. Data relating to the low-calorie breakfast line for the month of June are as follows. Overhead Rate Cost Drivers Activity Cost Pools Inspections of material received In-process inspections FDA certification Number of pounds Number of servings $0.90 per pound $0.33 per serving $12.00 per order Number of Cost Drivers Used per Activity 6,100 pounds 10,500 servings 400 orders Customer orders Compute the quality-control overhead cost to be assigned to the low-calorie breakfast product line for the month of June (1) using the traditional product costing system (direct labor cost is the cost driver), and (2) using activity-based costing. Traditional product costing Activity-based costing Quality-control overhead cost to be assigned LINK TO TEXT LINK TO TEXT LINK TO TEXT VIDEO: APPLIED SKILLS By what amount does the traditional product costing system undercost or overcost the low-calorie breakfast line? $ Classify each of the activities as value-added or non-value-added. Activites Inspections of material received In-process inspections FDA certification LINK TO TEXT LINK TO TEXT LINK TO TEXT