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 labour cost. Monthly direct labour cost for the enamel paint line isRs. 98,000. In an attempt to more equitably distribute quality control costs, Rainbow is considering activity basedcosting The monthly data shown in the following chart have been gathered for the enamel paint
|
Activity Cost Pool |
Cost Driver |
Pool Rates |
Quantity of Driverfor Enamel Paint |
|
Incoming material inspection |
Type of material |
Rs. 23.00 per type |
24 types |
|
In Process inspection |
Number of units |
Rs. 0.28 per unit |
35,000 units |
|
Product certification |
Per order |
Rs. 144.00 per order |
50 orders |
Required: Calculate the monthly quality control cost to be assigned to the enamel paint line under each of the following product costing systems.
a. Traditional system which assigns overhead on the basis of direct labour cost.
b. Activity based costing.