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
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Activity Cost Pool
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Cost Driver
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-
Pool Rates
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Quantity of Driverfor Enamel Paint
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Incoming material inspection
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Type of material
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Rs. 23.00 per type
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24 types
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In-Process inspection
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Number of units
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Rs. 0.28 per unit
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35,000 units
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Product certification
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Per order
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Rs. 144.00 per order
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50 orders
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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.