Required information

E$4-12$ and E$4-13$

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:

$\backslash$table$[[,$Fabric Case,Leather Case$],[$Number of labor hours,$14,000,5,000],[$Number of material moves,$525,725],[$Number of setups,$40,60]]$

Total estimated overhead costs are $$152,000,$ of which $$125,000$ is assigned to the materials handling pool and $$27,000$ is assigned to the setup pool.

E$4-12($Algo$)$ Assigning Costs Using Traditional System, ABC System $[$LO $4-1,4-3,4-4,4-5,4-6]$

Required:

Calculate the overhead assigned to the fabric case using the traditional costing system based on labor hours.

Calculate the overhead assigned to the fabric case using ABC.

Was the fabric case over$-$ or undercosted by the traditional cost system compared to ABC?