Urban Elite Cosmetics has used a traditional cost accounting system to apply quality-control costs uniformly...
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Accounting
Urban Elite Cosmetics has used a traditional cost accounting system to apply quality-control costs uniformly to all products at a rate of 18 percent of direct-labor cost. Monthly direct-labor cost for Satin Sheen makeup is $111,000. 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 inspectionType of material In-process inspection Product certificatiorn Cost Driver Pool Rates 24.00 per type 26 types Number of units Per order 0.30 per unit 46,000 units 153.00 per order 55 orders 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
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