Bunker makes two types of briefcases, 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 pools: materials handling and setup. Pertinent data follow:

Total estimated overhead costs are $150,000, of which $110,000 is assigned to the materials handling pool and $40,000 is assigned to the setup pool.

Required:

1. Calculate the overhead assigned to the fabric case using the traditional costing system based on labor hours.
2. Calculate the overhead assigned to the fabric case using ABC.
3. Was the fabric case over- or undercosted by the traditional cost system compared to ABC?

	Fabric Case	Leather Case
Number of labor hours	15,000	9,000
Number of material moves	440	660
Number of setups	40	80