Kragan Clothing Company manufactures its own designed and labeled athletic wear and sells its products through catalog sales and retail outlets. While Kragan has for years used activity-based costing in its manufacturing activities, it has always used traditional costing in assigning its selling costs to its product lines. Selling costs have traditionally been assigned to Kragan's product lines at a rate of 70% of direct materials costs. Its direct materials costs for the month of March for Kragan's "high-intensity" line of athletic wear are $401,000. The company has decided to extend activity-based costing to its selling costs. Data relating to the "high-intensity" line of products for the month of March are as follows. Activity Cost Pools Sales commissions Advertising-TV Advertising-Internet Cost Drivers Dollar sales Minutes Cost of catalog sales Credit and collection Column inches Catalogs mailed Catalog orders Dollar sales Catalogs Overhead Rate $0.05 per dollar sales $300 per minute $10 per column inch $2.50 per catalog $1 per catalog order $0.03 per dollar sales Number of Cost Drivers Used per Activity $926,000 270 2,200 59,600 8,550 $926,000 Compute the selling costs to be assigned to the "high-intensity" line of athletic wear for the month of March (1) using the traditional product costing system (direct materials cost is the cost driver), and (2) using activity-based costing. Traditional product costing Activity-based costing Selling cost to be assigned LINK TO TEXT LINK TO TEXT LINK TO TEXT $ $ By what amount does the traditional product costing system undercost or overcost the "high-intensity" product line? Overcost VIDEO: SIMILAR EXERCISE