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The cost of the job under the activity-based costing system

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Reference no: EM13518342

Swagg Jewelry Corporation manufactures custom jewelry. In the past, Swagg has been using a traditional overhead allocation system based solely on direct labor hours.

Sensing that this system was distorting costs and selling prices, Swagg has decided to switch to an activity-based costing system using three activity cost pools. Information on these activity cost pools are as follows:

Activity Cost Pool

Estimated Activity

Estimated Overhead Cost

Labor related

8,000

direct labor hours

$40,000

Machine related

12,500

machine hours

$50,000

Quality control

800

number of inspections

$12,000

Job #309 incurred $900 of direct material, 30 hours of direct labor at $40 per hour, 80 machine hours, and 5 inspections.

Required:

a. What is the cost of the job under the activity-based costing system?

b. Relative to the activity-based costing system, would Job #309 have been overcosted or undercosted under the traditional system and by how much?

Reference no: EM13518342

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