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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
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: Number of labor hours Number of material moves Number of setups Fabric Case 16,000 546 52 Leather Case 9,000 854 78 Total estimated overhead costs are $214,000, of which $175,000 is assigned to the materials handling cost pool and $39,000 is assigned to the setup cost pool. Required: 1. Calculate the overhead assigned to the leather case line using the traditional costing system based on direct labor hours. (Do not round intermediate calculations.) Overhead Assigned This is a numeric cell, so please enter numbers only. 2. Calculate the overhead assigned to the leather case line using ABC. Overhead Assigned 3. Was the leather case over- or undercosted by the traditional cost system compared to ABC? Leather Case Under-costed
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