Question
New Rage Cosmetics has used a traditional cost accounting system to apply quality control costs uniformly to all products at a rate of 14.5% of
New Rage Cosmetics has used a traditional cost accounting system to apply quality control costs uniformly to all products at a rate of 14.5% of direct labor cost.Monthly direct labor cost for Satin Sheen makeup is $27,500.In an attempt to distribute quality control costs more equitably, New Rage is considering activity-based costing.The monthly data shown in the chart below have been gathered for Satin Sheen.
Activity
Cost Driver
Cost Rates
Quantity for
Satin Sheen
Incoming material inspection
Type of material
$11.50 per type
12 types
In-process inspection
Number of units
$0.14 per unit
17,500 units
Product certification
Per order
$77per order
25 orders
The monthly quality control cost assigned to Satin Sheen makeup using activity-based costing is
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