Required information

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 $$234,000,$ of which $$198,000$ is assigned to the materials handling pool

and $$36,000$ is assigned to the setup pool.

Required:

Calculate the overhead assigned to the leather case line using the traditional costing system based on labor hours.

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

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

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