Assign overhead using traditional costing and ABC Saddle Inc. has two types of handbags: standard and custom. The controller has overhead rate based on direct labor costs. The president has heard of activity-based o machining the results would differ if this system was used. Two activity cost pools were developed setup. Presented below is information related to the company's operations. decided to use a plantwide s to see how Direct labor costs Machine hours Setup hours Standard Custom $50,000 $100,000 1,000 1,000 100 400 Total estimated overhead costs are $240,000. overhead cost allocated to the machining $140,000 and $100,000 is allocated to the machine setup activity cost activity cost pool is pool. Instructions (a) Compute the overhead rate using the traditional (plantwide) approach (b) Compute the overhead rates using the activity-based costing approach (c) Determine the difference in allocation between the two approaches. th a "? NOTE Enter a number in cells requesting a value; enter either a number or a formula in cells wi : Estimated overheadPredetermined overhead rate Direct labor costs (a) Value of direct labor cost Value Value Activity cost pools Machining Cost drivers Machine hours Setup hours Estimated overhead $140,000 100,000 (b) Machine setup Activity-based overhead rates Machining: 1,000 60 Value Value per machine hour Machine setup: Value-[ Unlts per setup hour Tistal u (c) Traditional costing: Costs $50,000 x POH rate $100,000 POH rate Standard $%10000 - P0 a0som Unit costs Custom Total Egun Unit costs Total OH allocation osts to be Work in Starred Activity-based costing Total Standard Machining 1,000 MH x OH rate 1,000 MH x OH rate Custom ferred in prox l co Machine setup: 100 Setup Hr x OH rate? 400 Setup Hr x OH rate Total OH allocation After you have completed E4-1, consider the additional question. 1. Assume that total estimated overhead costs are $285,000. Overhead cost allocated to the machining activity cost pool is$150,000 and $135,000 is allocated to the machine setup activity cost pool Redo instructions (a) to (c)