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Presentation/PPT
27/08/2022
Rainbow Spray Paints, Inc. has used a traditional cost accounting system to apply quality control costs uniformly to all products at a rate of 16 percent of direct-labor cost. Monthly direct-labor cost for enamel paint line is $98,000. in an attempt to more equitably distribute quality-control costs, Rainbow is considering activity-based costing. The monthly data shown in the following chart have been gathered for the enamel paint line. Activity Cost PoolCost DriverPool RatesQuality of Driver for Enamel PaintIncoming Material InspectionType of material$23.00 per type24 typesIn Process InspectionNumber of units.28 per unit35,000 unitsProduct certificationPer order144.00 per order50 orders1. Calculate the monthly quality-control cost to be assigned to the enamel paint line under each of the following product-costing systemsa.traditional system which assigns overhead on the basis of direct-labor costb.Activity based costing2. Does the traditional product costing system over-cost or under-cost the enamel paint line with respect to quality control costs? By what amount?Rainbow Spray Paints, Inc. has used a traditional cost accounting systemto apply quality control costs uniformly to all products at a rate of 16percent of direct-labor cost. Monthly direct-labor cost for enamel paintline is $98,000. in an attempt to more equitably distributequality-control costs, Rainbow is considering activity-based costing.The monthly data shown in the following chart have been gathered for theenamel paint line.Activity Cost PoolCost DriverPool RatesQuality of Driver forEnamel PaintIncoming Material InspectionType of material$23.00 per type24 typesIn Process InspectionNumber of units.28 per unit35,000 unitsProduct certificationPer order144.00 per order50 orders1. Calculate the monthly quality-control cost to be assigned to theenamel paint line under each of the following product-costing systemstraditional system which assigns overhead on the basis of direct-laborcostActivity based costing2. Does the traditional product costing system over-cost or under-costthe enamel paint line with respect to quality control costs? By whatamount?
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