Kelso Manufacturing allocates manufacturing overhead using a single predetermined rate based on a planned use of 15,000 direct labour hours per year. Company leadership recently learned that its costing system may be too simple for its operations, and that job costs may be fairly inaccurate. A consultant was hired to study overhead costs, and the following information reflects the cost pools and activity rates that were determined:

Cost Pool	Total Cost	Activity Rate
Purchasing	$90,000	$30/purchase order
Assembly	$150,000	$10/direct labour hour
Inspection	$60,000	$15/inspection
Production	$150,000	$3/Production run
Total	$450,000

Job #156 required 25 purchase orders, 400 direct labour hours, 50 production runs, and 100 inspections. If a traditional costing system was used, this job would be:

Question 10

a.

Undercosted by $5,600

b.

Overcosted by $3,500

c.

Undercosted by $3,500

d.

Overcosted by $8,000