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 10,000

Number of material moves 551 899

Number of setups 56 84

Total estimated overhead costs are $223,250, of which $181,250 is assigned to the materials handling cost pool and $42,000 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.)

I got 89,300 as the overhead assigned

2.Calculate the overhead assigned to the leather case line using ABC

????? I still need the overhead assigned for ABC ??????

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

It was under-costed