Exercise 17-11 (Part Level Submission) Health \'R Us, Inc., uses a tr requiremen
ID: 2522785 • Letter: E
Question
Exercise 17-11 (Part Level Submission) Health 'R Us, Inc., uses a tr 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 requests from its financial vice president, Health "R Us's management al product costing system to assign overhead costs uniformly to all its packaged multigrain products. To meet Food and Drug Administration t costs to all products at a rate of 17% of direct labor costs. Its direct labor cost for the month ofJune for its low-calorie brea line is $70,000. In response to repeated t agrees to adopt activity-based costing. Data relating to the low-calorie breakfast line for the month of June are as follows. Overhead Rate Number of Cost Drivers Activity Cost Pools Cost Drivers Used per Inspections of material received Number of pounds $0.90 per pound 6,200 pounds 10,200 servings 410 orders $0.33 per serving Number of servings Customer orders $12.00 per order thead 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 overhead cost to be assigned Click if you would like to Show Work for this question:Explanation / Answer
Traditional Costing method: Direct labour cost on Product 70,000 OH rate % of labour cost 17% of labour cost OH assigned to product 11900 ABC costing: Activity Rate Activity consumed Activity cost assigned Inspection of material 0.9 per pound 6200 pounds 5580 In process inspection 0.33 per serving 10200 servings 3366 FDA certification 12 Per order 410 orders 4920 Total Activity cost assigned 13866 Traditional ABC Quality control overheads cost to be assigned 11900 13866
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