Bridgeport, Inc., uses a traditional product costing system to assign overhead costs uniformly to all its packaged
multigrain products. To meet Food and Drug Administration requirements and to assure its customers of safe,
sanitary, and nutritious food, Bridgeport engages in a high level of quality control. Bridgeport assigns its quality-
control overhead costs to all products at a rate of 17% of direct labor costs. Its direct labor cost for the month of
June for its low-calorie breakfast line is $73,500. In response to repeated requests from its financial vice
president, Bridgeport's management agrees to adopt activity-based costing. Data relating to the low-calorie
breakfast line for the month of June are as follows.
Activity Cost Pools
Cost Drivers
Inspections of material received
Number of pounds
In-process inspections
Number of servings
FDA certification
Customer orders
Overhead
Rate
$0.90 per pound
$0.33
per
serving
$12.00 per order
Number of Cost
Drivers
Used per Activity
6,000 pounds
10,500 servings
420 orders
(a)
Compute the quality-control overhead 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.
Quality-control overhead cost to be
assigned
Traditional product costing
Activity-based costing
$
$
