Bunker makes two types of briefcases, 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 pools: materials handling and setup. Pertinent data follow: Number of labor hours Number of material moves Number of setups Fabric Case 15,000 551 56 Leather Case 10,000 899 84 Total estimated overhead costs are $223,250, of which $181,250 is assigned to the materials handling pool and $42,000 is assigned to the setup pool. Required: 1. Calculate the overhead assigned to the leather case line using the traditional costing system based on 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?
Bunker makes two types of briefcases, 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 pools: materials handling and setup. Pertinent data follow: Number of labor hours Number of material moves Number of setups Fabric Case 15,000 551 56 Leather Case 10,000 899 84 Total estimated overhead costs are $223,250, of which $181,250 is assigned to the materials handling pool and $42,000 is assigned to the setup pool. Required: 1. Calculate the overhead assigned to the leather case line using the traditional costing system based on 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Bunker makes two types of briefcases, 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 pools: materials handling and setup. Pertinent data follow:
Number of labor hours
Number of material moves
Number of setups
Fabric Case
15,000
551
56
Leather Case
10,000
899
84
Total estimated overhead costs are $223,250, of which $181,250 is assigned to the materials handling pool and $42,000
is assigned to the setup pool.
Required:
1. Calculate the overhead assigned to the leather case line using the traditional costing system based on 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?
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