Bramble Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor 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 and machine setup. Presented below is information related to the company's operations.

Standard Custom

Direct labor costs $50,000 $100,000

Machine hours 1,200 1,500

Setup hours 90 390

Total estimated overhead costs are $285,000. Overhead cost allocated to the machining activity cost pool is $189,000, and $96,000is allocated to the machine setup activity cost pool

Compute the overhead rate using the traditional (plant wide) approach.(Round answer to 2 decimal places, e.g. 12.25.)

a)

Predetermined overhead rate 190.00 % of direct labor cost

b)

Compute the overhead rates using the activity-based costing approach.

Machining $ 70 per machine hour

Machine setup $ 200 per setup hour

c)

Determine the difference in allocation between the two approaches.

Traditional costing

Standard $

Custom $

Activity-based costing

Standard $

Custom $