Urban Elite Cosmetics has used a traditional cost accounting system to apply quality-control costs uniformly to all products at a rate of 14.5 percent 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, management is considering activity-based costing. The monthly data shown in the following chart have been gathered for Satin Sheen makeup.

Required:
1. Calculate the monthly quality-control cost to he assigned to the Satin Sheen product line under each of the following product-costing systems.
a. Traditional system, which assigns overhead on the basis of direct-labor cost.
b. Activity-based costing.
2. Does the traditional product-costing system over cost or under cost the Satin Sheen product line with respect to quality-control costs? By what amount?

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Quantity of Driver for Satin Sheen Pool Rates Activity Cost Pool Incoming material inspectionT In-process inspection Product certificationP Cost Driver Type of material Number of units Per order $11.50 per type. 12 types 17,500 units 14 per unit 77.00 per order. 25 orders