Current Attempt in Progress 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 'RUS 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 low-calorie breakfast line is $74,000. In response to repeated requests from its financial vice president, Health 'R Us's management agrees to adopt activity-based costing. Data relating to the low- calorie breakfast line for the month of June are as follows. Activity Cost Pools Inspections of material received In-process inspections FDA certification Cost Drivers Number of pounds Number of servings Customer orders Overhead Rate $0.90 per pound $0.33 per serving $12.00 per order Number of Cost Drivers Used per Activity 5,500 pounds 10,700 servings 430 order Compute the quality-control overhead cost to be assigned to the low-calorie breakfast product line for the month of June (1) using the traditional product costing system (direct labor cost is the cost driver), and (2) using activity-based costing.
Current Attempt in Progress 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 'RUS 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 low-calorie breakfast line is $74,000. In response to repeated requests from its financial vice president, Health 'R Us's management agrees to adopt activity-based costing. Data relating to the low- calorie breakfast line for the month of June are as follows. Activity Cost Pools Inspections of material received In-process inspections FDA certification Cost Drivers Number of pounds Number of servings Customer orders Overhead Rate $0.90 per pound $0.33 per serving $12.00 per order Number of Cost Drivers Used per Activity 5,500 pounds 10,700 servings 430 order Compute the quality-control overhead cost to be assigned to the low-calorie breakfast product line for the month of June (1) using the traditional product costing system (direct labor cost is the cost driver), and (2) using activity-based costing.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Compute the quality-control overhead cost to be assigned to the low-calorie breakfast product line for the month of June (1)
using the traditional product costing system (direct labor cost is the cost driver), and (2) using activity-based costing.
Quality control overhead cost to be assigned
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By what amount does the traditional product costing system undercost or overcost the low-calorie breakfast line?
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Question 3 of 4
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Classify each of the activities as value-added or non-value-added.
Activites
Inspections of material received
In-process inspections
FDA certification
Traditional product costing
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Activity-based costing
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Transcribed Image Text:Question 3 of 4
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Current Attempt in Progress
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 low-calorie breakfast line is $74,000. In response to repeated
requests from its financial vice president, Health 'R Us's management agrees to adopt activity-based costing. Data relating to the low-
calorie breakfast line for the month of June are as follows.
Activity Cost Pools
Inspections of material received
In-process inspections
FDA certification
Cost Drivers
Number of pounds
Number of servings
Customer orders
-/3.75
Overhead
Rate
$0.90 per pound
$0.33 per serving
$12.00 per order
Number of Cost Drivers
Used per Activity
5,500 pounds
10,700 servings
430 orders
Compute the quality-control overhead cost to be assigned to the low-calorie breakfast product line for the month of June (1)
using the traditional product costing system (direct labor cost is the cost driver), and (2) using activity-based costing.
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