Swagg Jewelry Corporation manufactures custom jewelry. In the past Swagg has b

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

8000

direct labor hours

$40000

Machine related

12500

machine hours

$50000

Quality control

800

number of inspections

$12000

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?