Carla Vista 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 here is information related to the company's operations. Direct labor costs Machine hours Setup hours Standard $50,000 1,000 100 Custom $100,000 Predetermined overhead rate 1,000 400 Total estimated overhead costs are $322,500. Overhead cost allocated to the machining activity cost pool is $180,000, and $142,500 is allocated to the machine setup activity cost pool. Compute the overhead rate using the traditional (plantwide) approach. % of direct labor cost

Carla Vista 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 here is information related to the company's operations. Total estimated overhead costs are $322,500. Overhead cost allocated to the machining activity cost pool is $180,000, and $142,500 is allocated to the machine setup activity cost pool. (a) Compute the overhead rate using the traditional (plantwide) approach. Predetermined overhead rate Xot direct labor cost