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Health R US To meet Food and Drug Administration requirements 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 $74,00O. In response to repeated requests from its financial vice president, Health 'R Us's management agrees to adopt activity-based costing. Data relating to the low- calorie breakfast line for the month of June are as follows. Overhead Number of Cost Drivers Activity Cost Pools Cost Drivers Rate Used per Activity Inspections of material received Number of pounds $0.90 per pound 5,500 pounds In-process inspections Number of servings $0.33 per serving 10,700 servings Customer orders $12.00 per order 430 orders FDA certification

Health R US To meet Food and Drug Administration requirements 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 $74,00O. In response to repeated requests from its financial vice president, Health 'R Us's management agrees to adopt activity-based costing. Data relating to the low- calorie breakfast line for the month of June are as follows. Overhead Number of Cost Drivers Activity Cost Pools Cost Drivers Rate Used per Activity Inspections of material received Number of pounds $0.90 per pound 5,500 pounds In-process inspections Number of servings $0.33 per serving 10,700 servings Customer orders $12.00 per order 430 orders FDA certification

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter14: Quality And Environmental Cost Management
Section: Chapter Questions
Problem 6CE: Pinter Company had the following environmental activities and product information: 1. Environmental...
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Health 'R Us, Inc., uses a traditional product costing system to assign overhead costs uniformly to all its packaged multigrain products. To meet Food and Drug Administration requirements 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 $74,00O. In response to repeated requests from its financial vice president, Health 'R Us's management agrees to adopt activity-based costing. Data relating to the low- calorie breakfast line for the month of June are as follows. Overhead Number of Cost Drivers Activity Cost Pools Cost Drivers Rate Used per Activity Inspections of material received Number of pounds $0.90 per pound 5,500 pounds In-process inspections Number of servings $0.33 per serving 10,700 servings Customer orders $12.00 per order 430 orders FDA certification
Transcribed Image Text:Health 'R Us, Inc., uses a traditional product costing system to assign overhead costs uniformly to all its packaged multigrain products. To meet Food and Drug Administration requirements 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 $74,00O. In response to repeated requests from its financial vice president, Health 'R Us's management agrees to adopt activity-based costing. Data relating to the low- calorie breakfast line for the month of June are as follows. Overhead Number of Cost Drivers Activity Cost Pools Cost Drivers Rate Used per Activity Inspections of material received Number of pounds $0.90 per pound 5,500 pounds In-process inspections Number of servings $0.33 per serving 10,700 servings Customer orders $12.00 per order 430 orders FDA certification
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 driver), and (2) using activity-based costing. Traditional product costing Activity-based costing Quality-control overhead cost to be assigned 24 11,900 24 13,773 eTextbook and Media Your answer is partially correct. By what amount does the traditional product costing system undercost or overcost the low-calorie breakfast line? Undercost 24 1,873
Transcribed Image Text: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 driver), and (2) using activity-based costing. Traditional product costing Activity-based costing Quality-control overhead cost to be assigned 24 11,900 24 13,773 eTextbook and Media Your answer is partially correct. By what amount does the traditional product costing system undercost or overcost the low-calorie breakfast line? Undercost 24 1,873
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