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Urban Elite Cosmetics has used a traditional cost accounting system to apply quality-control costs uniformly to all products at a rate of 17 percent of
Urban Elite Cosmetics has used a traditional cost accounting system to apply quality-control costs uniformly to all products at a rate of 17 percent of direct-labor cost. Monthly direct-labor cost for Satin Sheen makeup is $104,000. In an attempt 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 Satin Sheen makeup. Quantity of Driver for Satin Sheen Activity Cost Pool Incoming material inspection In-process inspection Product certification Cost Driver Pool Rates $ 29.00 per type 0.31 per unit 158.00 per order Type of material Number of units 29 types 39,000 units 55 orders Per order Required: 1. Calculate the monthly quality-control cost to be assigned to the Satin Sheen product line under each of the following product- costing systems. a. Traditional system, which assigns overhead on the basis of direct-labor cost. b. Activity-based costing. 2. Does the traditional product-costing system overcost or undercost the Satin Sheen product line with respect to quality-control costs? By what amount? Calculate the monthly quality-control cost to be assigned to the Satin Sheen product line under the Traditional product- costing system and the Activity-based product-costing system. Assigned Cost Traditional system . b. Activity-based costing Does the traditional product-costing system overcost or undercost the Satin Sheen product line with respect to quality-control costs? By what amount? Traditional system by
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