Urban Elite Cosmetics has used a traditional cost accounting system to apply quality-control costs uniformly to all prod
Posted: Mon May 30, 2022 6:20 am
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 $98,000. 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.
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?
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 $98,000. 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.
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?