Urban Africa cosmetics has used a traditional cost accounting system to apply quality-control costs uniformly to all products at a rate of 14% of direct-labor cost. Monthly direct-labor cost for Nile Blush makeup is 27,500. 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 Nile Blush makeup. Activity Cost Pool Incoming material inspection In-process inspection Product certification Required: Calculate the monthly quality-control cost to be assigned to the Nile Blush product line under each of the following product- costing system. a. Traditional system which assigns overhead on the basis of direct-labor costs b. ABC Does the traditional product-costing system overcost or undercost the Nile Blush product line with respect to quality-control costs? By what amount? Cost Driver Type of material Number of units Per order Pool Rates 11.5 per type .14 per unit 77 per order Quantity of Driver for Nile Blush 10 types 18,000 units 20 orders

Urban Africa cosmetics has used a traditional cost accounting system to apply quality-control costs uniformly to all products at a rate of 14% of direct-labor cost. Monthly direct-labor cost for Nile Blush makeup is 27,500. 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 Nile Blush makeup. Activity Cost Pool Incoming material inspection In-process inspection Product certification Required: Calculate the monthly quality-control cost to be assigned to the Nile Blush product line under each of the following product- costing system. a. Traditional system which assigns overhead on the basis of direct-labor costs b. ABC Does the traditional product-costing system overcost or undercost the Nile Blush product line with respect to quality-control costs? By what amount? Cost Driver Type of material Number of units Per order Pool Rates 11.5 per type .14 per unit 77 per order Quantity of Driver for Nile Blush 10 types 18,000 units 20 orders

Name: Urban Africa cosmetics has used a traditional cost accounting system
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Description: Urban Africa cosmetics has used a traditional cost accounting system to apply quality-control costs uniformly to all productsat a rate of 14% of direct-labor cost. Monthly direct-labor cost for Nile Blush makeup is 27,500. In an attempt to moreequit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Problem 1Q

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