Bunker makes two types of briefcase, fabric and leather. The company is currentl

ID: 2523434 • 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 Fabric Case Leather Case 10,000 899 84 15,000 551 56 Total estimated overhead costs are $223,250, of which $181,250 is assigned to the materials handling cost pool and $42,000 is assigned to the setup cost pool Required: 1. Calculate the overhead assigned to the leather case line using the traditional costing system based on direct labor hours. (Do not round intermediate calculations.) 2. Calculate the overhead assigned to the leather case line using ABC. 3. Was the leather case over-or undercosted by the traditional cost system compared to ABC? ther Case