Blossom Inc. makes two types of handbags: standard and custom. The controller has decided to use a plant-wide overhead rate based on direct labour costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining (machine hours) and machine set-up (number of set-ups). The total estimated machine hours is 1,500 , and the total estimated number of setups is 500 . Presented below is information related to the company's operations. Total estimated overhead costs are $345,000. The overhead cost allocated to the machining activity cost pool is $184,500, and $160,500 is allocated to the machine set-up activity cost pool. (a) Your answer is correct. Calculate the overhead rate using the traditional (plant-wide) approach. Predetermined overhead rate 230% of direct labour cost Calculate the overhead rate using the activity-based costing approach. Determine the difference in allocation between the two approaches by subtracting the activity-based costing results from the traditional costing results