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Healthy Products Inc. uses a traditional product costing system to assign overhead costs uniformly to all products. To meet Canadian Food Inspection Agency (CFIA) requirements
Healthy Products Inc. uses a traditional product costing system to assign overhead costs uniformly to all products. To meet Canadian Food Inspection Agency (CFIA) requirements and to assure its customers of safe, sanitary, and nutritious food, Healthy Products engages in a high level of quality control. It assigns its quality-control overhead costs to all products at a rate of 17% of direct labour costs. Its direct labour cost for the month of June for its low-calorie dessert line is $65,000. In response to repeated requests from its vice-president, finance, Healthy's management agrees to adopt activity-based costing. Data relating to the low-calorie dessert line for the month of June are as follows: Number of Cost Drivers Used per Activity Activity Cost Pools Cost Drivers Rate Inspections of material received Number of kilograms $0.70 per kilogram In-process inspections Number of servings CFIA certification: Customer orders $0.30 per serving $14.00 per order 7,420 kilograms 11.100 servings 490 orders (a) Calculate the quality-control overhead cost to be assigned to the low-calorie dessert product line for the month of June using: 1. The traditional product costing system (direct labour cost is the cost driver).. Calculate the quality-control overhead cost to be assigned to the low-calorie dessert product line for the month of June using: 1. The traditional product costing system (direct labour cost is the cost driver), Quality control overhead cost assigned 2. Activity-based costing. Quality control overhead cost assigned
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