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 Products' management agrees to adopt activity-based costing. Data relating to the low-calorie dessert line for the month of June are as follows:

E5.29 (LO 1, 2, 3) 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 Products' 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 Cost Pools Cost Drivers Rate Activity Inspections of material Number of kilograms $ 0.80 per kilogram 6,000 kilograms received In-process inspections Number of servings $ 0.33 per serving 10,000 servings CFIA certification Customer orders $12.00 per order 420 orders Instructions 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), and 2. activity-based costing. b. By what amount does the traditional product costing system undercost or overcost the low-calorie dessert line relative to costing under ABC? c. Classify each of the activities as value-added or non-value-added. Non-value-added