Smith Machining makes three products. The company's annual budget includes $1,000,000 of overhead. In the past, the company allocated overhead based on expected capacity of 40,000 direct labor hours. The company recently implemented an activity-based costing system and has determined that overhead costs can be broken into four overhead pools: order processing, setups, milling, and shipping. The following is a summary of company information:

Required

a. Calculate the company's overhead rate based on direct labor hours.
b. Calculate the company's overhead rates using the activity-based costingpools.

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Expected CostEaeked Acliviies Order processin Setups Milling Shipping $175,000 160,000 410,000 255,000 $1,000,000 10,000 orders 4,000 setups 20,500 machine hours 25,000 shipments