Trendy Toys & Games, Inc. manufactures specialty toys. Trendy uses a traditional product costing system to assign overhead costs uniformly to all products. To meet industry safety standards and to assure its customers of safe and durable toys, Trendy assigns its quality-control overhead costs to all products at a rate of 22% of direct labor costs. Its direct labor cost for the month of August for its toddler line of toys is $345.000. In response to repeated requests from its financial vice president, Trendy's management agrees to adopt activity-based costing. Data relating to the toddler line of toys for the month of August are as follows: Activity Cost Pools Materials Inspection pounds Assembly Line Inspection National Toy Association Certification Cost Drivers Number of pounds Number of finished toys Retail orders Overhead Rate $0.70 per pound $0.16 per toy $2.00 per order Number of Cost Drivers Used per Activity 45,000 210,000 toys 600 orders Compute the quality-control overhead cost to be assigned to the toddler toy line for the month of August (1) using the traditional product costing system (direct labor is the cost driver), and (2) using activity-based costing. Quality Control Overhead Cost $ Traditional costing Activity-based costing $ By what amount does the traditional product costing system undercost or overcost the toddler toy line? The traditional product costing system overhead by $ overcosts undercost Classify each of the activities as value-added or not-value added. Materials Inspection