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Redwood Manufacturers has used a traditional cost accounting system to apply quality-control costs uniformly to all products at a rate of 24 percent of direct-labout
Redwood Manufacturers has used a traditional cost accounting system to apply quality-control costs uniformly to all products at a rate of 24 percent of direct-labout cost Monthly direct-fabor cost for the product line Truck Wheels is $41.250. To more equitably distribute quality control costs, management is considering activity. based costing. The monthly data shown in the following chart have been gathered for Redwood Manufacturers. You are required tos a. Calculate the monthly quality-control cost to be assigned to the product line under traditional costing system, which assigns owathead on the basis of direct labour cost (round to the nearest dollar). ( 4 marks) b. Calculate the monthly quality-control cost to be assigned to the prodict line under activity based costing system- ( marks) c. Does the traditional product-costing system overcost or undercost the product line with respect to quality: control costs? By what amount? (2 marks)
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