Bunker makes two types of briefcase, fabric and leather. Thecompany is currently using a traditional costing system with laborhours as the cost driver but is considering switching to anactivity-based costing system. In preparation for the possibleswitch, Bunker has identified two activity cost pools: materialshandling and setup. Pertinent data follow:
Fabric Case Leather Case Number of laborhours 17,000 11,000 Number of materialmoves 560 1,040 Number ofsetups 35 135
Total estimated overhead costs are $249,800, of which $192,000is assigned to the materials handling cost pool and $57,800 isassigned to the setup cost pool.
Required: 1. Calculate the overhead assigned to the fabric case using thetraditional costing system based on direct labor hours. (Donot round intermediate calculations.)
Overhead assigned:
2. Calculate the overhead assigned to the fabric case usingABC.
Overhead assigned:
3. Was the fabric case over- orundercosted by the traditional cost system compared to ABC? Fabric case:
Bunker makes two types of briefcase, fabric and leather. Thecompany is currently using a traditional costing system with laborhours as the cost driver but is considering switching to anactivity-based costing system. In preparation for the possibleswitch, Bunker has identified two activity cost pools: materialshandling and setup. Pertinent data follow: |
| Fabric Case | Leather Case | |||
| Number of laborhours | 17,000 | 11,000 | ||
| Number of materialmoves | 560 | 1,040 | ||
| Number ofsetups | 35 | 135 | ||
Total estimated overhead costs are $249,800, of which $192,000is assigned to the materials handling cost pool and $57,800 isassigned to the setup cost pool. |
| Required: | |
| 1. | Calculate the overhead assigned to the fabric case using thetraditional costing system based on direct labor hours. (Donot round intermediate calculations.) |
| Overhead assigned: | |
| 2. | Calculate the overhead assigned to the fabric case usingABC. |
| Overhead assigned: | |
| 3. | Was the fabric case over- orundercosted by the traditional cost system compared to ABC? |
| Fabric case: | |
Related questions
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 | 12,000 | 11,000 | ||
| Number of material moves | 483 | 667 | ||
| Number of setups | 42 | 38 | ||
Total estimated overhead costs are $135,000, of which $115,000 is assigned to the materials handling cost pool and $20,000 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. (Do not round intermediate calculations and round your final answer to the nearest whole dollar amount.)
2. Calculate the overhead assigned to the fabric case using ABC. (Round activity rates or activity proportions, and intermediate calculations to four decimal places.)
3. Was the fabric case over- or undercosted by the traditional cost system compared to ABC?
