Germaine Lotions and Mystic Oils uses a traditional cost accounting system to apply quality control costs uniformly to all products at a rate of 14.5% of direct labor cost.This month's direct labor costs for the Mystic Oil line is $27,500.Germaine would like to distribute quality control costs in a more equitable manner and is considering the change to activity-based costing.The monthly data shown in the chart below have been gathered for Mystic Oils. Required: (1) Calculate the monthly quality control cost assigned to Mystic Oils using traditional costing. (2) Calculate the monthly quality control cost assigned to Mystic Oils using activity-based costing (ABC).

Question

Germaine Lotions and Mystic Oils uses a traditional cost accounting system to apply quality control costs uniformly to all products at a rate of 14.5% of direct labor cost.This month's direct labor costs for the Mystic Oil line is $27,500.Germaine would like to distribute quality control costs in a more equitable manner and is considering the change to activity-based costing.The monthly data shown in the chart below have been gathered for Mystic Oils.  Required: (1) Calculate the monthly quality control cost assigned to Mystic Oils using traditional costing. (2) Calculate the monthly quality control cost assigned to Mystic Oils using activity-based costing (ABC).

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The Answer of Germaine Lotions and Mystic Oils uses a traditional cost accounting system to apply quality control costs uniformly to all products at a rate of 14.5% of direct labor cost.This month's direct labor costs for the Mystic Oil line is $27,500.Germaine would like to distribute quality control costs in a more equitable manner and is considering the change to activity-based costing.The monthly data shown in the chart below have been gathered for Mystic Oils.  Required: (1) Calculate the monthly quality control cost assigned to Mystic Oils using traditional costing. (2) Calculate the monthly quality control cost assigned to Mystic Oils using activity-based costing (ABC).

Germaine Lotions and Mystic Oils Uses a Traditional Cost Accounting