Refer to E4-12.

Required:

1. Calculate the overhead assigned to the Super Doghouse line using the traditional costing system based on direct labor hours.

2. Calculate the overhead assigned to the Super Doghouse line using an activity based costing system. (Round activity rates or activity proportions to four decimal places if necessary.)

3. Was the Super Doghouse over or under costed by the traditional cost system compared to ABC?

Data from E4-12

Nixon makes two types of doghouse, plain and super. The company is currently using a traditional costing system with labor hours as the cost driver but is considering change to activity based costing. In preparation for the possible switch, Nixon has identified two cost pools: materials handling and setup. Pertinent data follow:

Total estimated overhead costs are \($150,000\) of which \($40,000\) is assigned to the material handling cost pool and \($110,000\) is assigned to the setup cost pool.

Transcribed Image Text:

Number of labor hours Number of material moves Number of setups Plain Doghouse 15,000 Super Doghouse 9,000 300 450 40 80