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Natural Cosmetic Ltd (NCL)

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Natural Cosmetic Ltd (NCL) has used a conventional cost accounting system to apply quality control costs uniformly to all products at a rate if 16 per cent of direct labour cost. Monthly direct labour cost for Satin Sheen make-up is $98000. In attempt to distribute quality control costs more equitably, NCL is considering activity-based costing. The data on the following page relates to monthly quality control costs for Satin Sheen make-up: please see attachment.

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Solution Summary

The answer explains the Conventional Approach and Activity Based Costing for the case. Explanation for the choice has also been provided.

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