New-Rage Cosmetics uses a traditional cost accounting system to allocate quality control costs uniformly to all products at a rate of 14.5% of direct labor cost. Monthly direct labor cost for Satin Sheen makeup is $27,500. In an attempt to more equitably distribute quality control costs, New-Rage is considering activity-based costing. The following monthly data have been gathered for Satin Sheen makeup.

Incoming material inspection:

Cost driver—type of material

Cost allocation rate—$11.50 per type of material

Quantity—12 types of material

In-process inspection:

Cost driver—number of units

Cost allocation rate—$0.14 per unit

Quantity—17,500 units

Product certification:

Cost driver—per order

Cost allocation rate—$77 per order

Quantity—25 orders

REQUIRED

A. Calculate the amount of quality control cost assigned to each order of Satin Sheen makeup using:

1. Activity-based costing (Hint: Total all the ABC costs for one month and divide by the number of orders.)

2. Traditional cost accounting

B. Explain the difference in quality control costs assigned under the two methods.