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Required information 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 Leather Case 8,000 15,000 672 1,428 108 162 Total estimated overhead costs are $393,300, of which $315,000 is assigned to the materials handling pool and $78,300 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 D

Required information 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 Leather Case 8,000 15,000 672 1,428 108 162 Total estimated overhead costs are $393,300, of which $315,000 is assigned to the materials handling pool and $78,300 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 D

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Required information 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 i Number of material moves Number of setups Fabric Case Leather Case 15,000 8,000 672 1,428 108 162 Total estimated overhead costs are $393,300, of which $315,000 is assigned to the materials handling pool and $78,300 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? 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 ABC. Note: Round activity rates or activity proportions and intermediate calculations to four decimal places. Round your final answer to the nearest whole dollar. Overhead Assigned < Required 1 Required 3 >
Transcribed Image Text:Required information 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 i Number of material moves Number of setups Fabric Case Leather Case 15,000 8,000 672 1,428 108 162 Total estimated overhead costs are $393,300, of which $315,000 is assigned to the materials handling pool and $78,300 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? 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 ABC. Note: Round activity rates or activity proportions and intermediate calculations to four decimal places. Round your final answer to the nearest whole dollar. Overhead Assigned < Required 1 Required 3 >
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