Question

E4-12 and E4-13 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 18,000 7,000 700 1,050 70 130 Total estimated overhead costs are $254,000, of which $210,000 is assigned to the materials handling cost pool and $44,000 is assigned to the setup cost pool. E4-12 (Algo) Assigning Costs Using Traditional System, ABC System (LO 4-1, 4-3, 4-4, 4-5, 4-6] Required: 1. Calculate the overhead assigned to the fabric case using the traditional costing system based on direct labor hours. 2. Calculate the overhead assigned to the fabric case using ABC. 3. Was the fabric 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 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)

Im not sure what I'm doing wrong these answers were both wrong and I'm very confused I re did the math and im not sure if im using the wrong formula

Answer 1

1. Overhead assigned to fabric case using traditional costing system = 182,880 $

Predetermined overhead rate = Estimated overhead cost / direct labor hours

Estimated overhead cost = 254,000 $

Direct labor hours = 18,000 + 7,000 = 25,000 hours

Predetermined overhead rate = 254,000 / 25,000

= 10.16 $ per hour

Direct labor hours of fabric = 18,000

Overhead assigned to fabric case = 18,000 * 10.16 = 182,880 $

2. Computation of overhead assigned to fabric using ABC Activity Cost D Fabric A 700 70 Leather B 1,050 130 Total A+B=C 1,750 200 Rate D/C 120 220 Material moves Setups 210,000 44,000 Activity Rate A Material moves 120 Setups 220 Total Volume B 700 70 Amount A*B 84,000 15,400 99,400 Overhead cost assigned to fabric using ABC = 99,400.00 $ 3. Fabric case overhead cost is overcosted by traditional costing compared to ABC.