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 Uss management agrees to adopt activity-based costing. Data relating to the low-calorie breakfast line for the month of June are as follows.

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. Activity Cost Pools Cost Drivers Inspections of material received Number of pounds In-process inspections Number of servings FDA certification Customer orders Overhead Rate $0.90 per pound $0.33 per serving $12.00 per order Number of Cost Drivers Used per Activity 5,900 pounds 10,700 servings 480 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? S LINK TO TEXT LINK TO TEXT LINK TO TEXT VIDEO: APPLIED SKILLS 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 VIDEO: APPLIED SKILLS