Solution:
1.)
Traditional product costing | Activity based costing | |
Quality- control overhead cost to be assigned | $11,900 | $13,866 |
Calculations;
Traditional product costing system:
Quality - control overhead costs to be assigned in June - $70,000 × 17% = $11,900
Activity based costing system:
Activity cost pools | Cost driver used (a) | Activity based overhead rate (b) | Overhead cost assigned (a) × (b) |
Inspection of materials received | 6,200 | $0.90 | $5,580 |
In - process inspection | 10,200 | $0.33 | $3,366 |
FDA certification | 410 | $12.00 | $4,920 |
Total overhead costs assigned | $13,866 | ||
2.)
$13866 -$11900
= $1,966 Under cost
The traditional costing system undercosts the quality control overhead costs assigned to the low - calorie dessert product line by $1966.
3.)
Activities: | |
Inspection of materials received | Non - value - added |
In - process inspection | Non - value - added |
FDA clarification | Non - value - added |
All three activities, as quality - control related activities, so these are non value added.
Health 'R Us, Inc., uses a traditional product costing system to assign overhead costs uniformly to...
Health 'R Us, Inc., uses a traditional product costing system to assign overhead costs uniformly to all its packaged multigrain products. To meet Food and Drug Administration requirements and to assure its customers of safe, sanitary, and nutritious food, Health 'R Us engages in a high level of quality control. Health R Us assigns its quality control overhead costs to all products at a rate of 17% of direct labor costs. Its direct labor cost for the month of June...
Health 'R Us, Inc., uses a traditional product costing system to assign overhead costs uniformly to all its packaged multigrain products. To meet Food and Drug Administration requirements and to assure its customers of safe, sanitary, and nutritious food, Health 'R Us engages in a high level of quality control. Health 'R Us assigns its quality-control overhead costs to all products at a rate of 17% of direct labor costs. Its direct labor cost for the month of June for...
Health 'R Us, Inc., uses a traditional product costing system to assign overhead costs uniformly to all its packaged multigrain products. To meet Food and Drug Administration requirements and to assure its customers of safe, sanitary, and nutritious food, Health 'R Us engages in a high level of quality control. Health 'R Us assigns its quality control overhead costs to all products at a rate of 17% of direct labor costs. Its direct labor cost for the month of June...
Health 'R Us, Inc., uses a traditional product costing system to assign overhead costs uniformly to all its packaged multigrain products. To meet Food and Drug Administration requirements and to assure its customers of safe, sanitary, and nutritious food, Health'R Us engages in a high level of quality control. Health 'R Us assigns its quality-control overhead costs to all products at a rate of 17% of direct labor costs. Its direct labor cost for the month of June for its...
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