Calculate the overhead assigned to the fabric case

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Reference no: EM132832152

Question - 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 9,000

Number of material moves 440 660

Number of setups 40 80

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

Required -

1. Calculate the overhead assigned to the fabric case using the traditional costing system based on direct 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?

Reference no: EM132832152

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