Question

Required information Part 2 of 2 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: 1.5 points Number of labor hours Number of material moves Number of setups Fabric Case Leather Case 15,000 9,000 440 660 40 80 eBook 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. Print References Required: 1. Calculate the overhead assigned to the leather case line using the traditional costing system based on direct labor hours. 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Calculate the overhead assigned to the leather case line 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 Required 1 Required 2 >

Answer 1

1)	Predetermined overhead rate = $150000/24000 hours
		=$6.25 per hour
	Overhead assign to leather case line
	=$6.25 per hour *9000
	=$56250
2)	Overhead assign to leather case line using ABC costing
	Material Handelling	=($110000/1100 moves)*660 moves	$        66,000
	Set Up cost	= ($40000/120 setups )*80 set up	$        26,667
	Total		$        92,667
3)	Undercosted
	As the $92667 is ABC coting and $56250 in traditional costing
Kindly give a positive rating if you are satisfied with this solution and please ask if you have any queries.