question b

E Al overhead sing raditional costing and ABC classify activities value or non-walue-added. p ull the relative to costing under ABC? I (LO 1, 2, 3), AP Health 'R Us, Inc., uses a traditional product costing system to assign overhead costs Untformy to all its packaged multigrain products. To meet Food and Drug Administration require ments 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 $70,000. In response to repeated requests from its financial vice president, Health R Us's management agrees to adopt activity-based costing, Data relating to low-calorie breakfast line for the month of June are as follows. Overhead Rate Number of Cost Drivers Used per Activity Cost Drivers Activity Cost Pools Inspections of material received In-process inspections FDA certification Number of pounds Number of servings Customer orders $0.90 per pound $0.33 per serving $12.00 per order 6,000 pounds 10,000 servings 420 orders 4-38 CHAPTER 4 Activity-Based Costing Instructions a. 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 driven and (2) using activity based costing b. By what amount does the traditional product costing system undercost or overcost the low-calorie breakfast line relative to costing under ABC