Business, 20.02.2020 04:50 offshoreext

Bunker makes two types of briefcase, fabric and leather. The company is currently using a traditional costing system with labor hours as the cost driver but is considering switching to an activity-based costing system. In preparation for the possible switch, Bunker has identified two activity cost pools: materials handling and setup. Pertinent data follow:

Fabric Case Leather Case
Number of labor hours 17,000 11,000
Number of material moves 560 1,040
Number of setups 35 135

Total estimated overhead costs are $249,800, of which $192,000 is assigned to the materials handling cost pool and $57,800 is assigned to the setup cost pool.

Required :
1.
Calculate the overhead assigned to the fabric case using the traditional costing system based on direct labor hours. (Do not round intermediate calculations.)

Overhead assigned:

2.
Calculate the overhead assigned to the fabric case using ABC.

Overhead assigned:

3. Was the fabric case over- or undercosted by the traditional cost system compared to ABC?

Answers: 2

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Bunker makes two types of briefcase, fabric and leather. The company is currently using a traditiona...

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