(Answered) Swagg jewelry corporation manufactures custom jewelry in

Accounting

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?

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