In this case, James Jones and William West's company, JW Sports Supplies, has begun to offer a second product line—a customized gym bag. The owners consider the topic of overhead allocation in determining the cost of its basic gym bag and the new customized gym bag. The company currently uses a traditional overhead allocation system, with one cost pool being allocated based on units. Noticing that the custom gym bags tend to be ordered in small batch sizes and require more time from the sales staff to sell, the owners consider the implications of an activity-based cost system. After allocating overhead costs based on an activity-based cost system, students must consider potential alternative courses of action that they could explore.
