Bunker makes two types of briefcase, fabric and leather. The company is currentl
ID: 2405488 • Letter: B
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 Number of labor hours Number of material moves Number of setups abric Case Leather Case 7,000 696 48 13,000 504 42 Total estimated overhead costs are $143,400, of which $120,000 is assigned to the materials handling cost pool and $23,400 is assigned to the setup cost pool 1. Calculate the overhead assigned to the fabric case using the traditional costing system based on direct labor hours. (Do not round intermediate calculations and round your final answer to the nearest whole dollar amount.) Overhead Assigned 2. Calculate the overhead assigned to the fabric case using ABC. (Round activity rates or activity proportions, and intermediate calculations to four decimal places.) erhead AssignedExplanation / Answer
Answers
Labor Hours:
A
Fabric Case
13,000
B
Leather Case
7,000
C = A+B
Total Labor hours
20,000
D
Total estimated overheads
$ 143,400.00
E = D/E
Tradition costing Overhead rate
$ 7.17
F = A x E
Overheads assigned to Fabric Case [ANSWER]
$ 93,210.00
A
Material handling overhead
$ 120,000.00
B = 504 + 696
Total no. of material moves
1,200
C = A/B
ABC rate per activity
$ 100.00
D
No. of material moves for Fabric Case
504
E = C x D
Material handling cost allocated
$ 50,400.00
F
Total setup cost
$ 23,400.00
G = 42+48
Total number of setups
90
H = F/G
ABC rate per activity
$ 260.00
I
No. of setups for Fabric Case
42
J = H x I
Setup cost allocated
$ 10,920.00
K = E + J
Overheads assigned (total) using ABC to fabric Case [ANSWER]
$ 61,320.00
Labor Hours:
A
Fabric Case
13,000
B
Leather Case
7,000
C = A+B
Total Labor hours
20,000
D
Total estimated overheads
$ 143,400.00
E = D/E
Tradition costing Overhead rate
$ 7.17
F = A x E
Overheads assigned to Fabric Case [ANSWER]
$ 93,210.00
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