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"Davis Corporation has used a traditional cost accounting system to apply quality control costs uniformly to all products at a rate of 15% of direct labor cost. Monthly direct labor cost for its main product is $30,000. In an attempt to distribute quality control costs more equitably, Davis is considering activity-based costing (ABC). The monthly data shown below have been gathered for the main product. The three activities are (1) incoming materials inspection, (2) in-process inspection, and (3) product certification. Costs are to be allocated to each activity on the basis of cost drivers."
Activity Cost Driver Cost Rate Quantity for Main Product
1 Number of types of materials $12 per type 12 types
2 Number of units $0.14 per unit 17,500 units
3 Number of orders $77 per order 30 orders
The monthly quality control cost assigned to the main product using ABC is