Bunker makes two types of briefcase, fabric and leather. The company is currently using a traditional...

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Accounting

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 CaseNumber of labor hours 15,000 9,000 Number of material moves 8201,230 Number of setups 40 220 Total estimated overhead costs are$380,300, of which $307,500 is assigned to the materials handlingcost pool and $72,800 is assigned to the setup cost pool. Calculatethe overhead assigned to the fabric case using ABC. (Round activityrates or activity proportions, and intermediate calculations tofour decimal places.) Was the fabric case over- or undercosted bythe traditional cost system compared to ABC?

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Cost item Cost Activity Cost per activity materials handling cost pool 307500 2050 material moves 150 per material move setup cost pool 72800 260 setups 280 per setup Calculation of the overhead assigned to the fabric case using See Answer

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