Required information Bunker makes two types of briefcase, fabric and leather. The company is currently using a traditior with labor hours as the cost driver but is considering switching to an activity-based costing system the possible switch, Bunker has identified two activity cost pools: materials handling and setup. Pe Fabric Case Leather Case Number of labor hours 14,000 504 6,000 696 Number of material moves Number of setups 27 63

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Please help, I don't understand how to calcualte the traiditional costing system.

Please answer the 3 questions. 

Required information
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
14,000
6,000
Number of material moves
Number of setups
504
696
27
63
Total estimated overhead costs are $143,400, of which $120,000 is assigned to the materials handling cost pool and
$23,400 is assigned to the setup cost pol.
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?
Transcribed Image Text:Required information 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 14,000 6,000 Number of material moves Number of setups 504 696 27 63 Total estimated overhead costs are $143,400, of which $120,000 is assigned to the materials handling cost pool and $23,400 is assigned to the setup cost pol. 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?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 3 images

Blurred answer
Knowledge Booster
Cost classification
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education