Bunker makes two types of briefcase, fabric and leather. The company is currently using a...
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Accounting
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
15,000
6,000
Number of material moves
672
1,428
Number of setups
32
238
Total estimated overhead costs are $393,300, of which $315,000 is assigned to the materials handling cost pool and $78,300 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 and round your final answer to the nearest whole dollar amount.)2. Calculate the overhead assigned to the fabric case using ABC. (Round activity rates or activity proportions, and intermediate calculations to four decimal places.)3. Was the fabric case over- or undercosted by the traditional cost system compared to ABC?
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