Clinomania has budgeted overhead costs of $1,186,000. It has assigned overhead on a plantwide basis to its two products (silk and nylon) using direct labor hours, which are estimated to be 593,000 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are cutting (cost driver is machine hours) and design (cost driver is number of setups). Overhead allocated to the cutting cost pool is $340,000 and $846,000 is allocated to the design cost pool. Additional information related to these pools is as follows.

	Silk	Nylon	Total
Machine hours	85,000	85,000	170,000
Number of setups	1,880	940	2,820

Determine the amount of overhead assigned to the silk product line and the nylon product line using activity-based costing.

	Cutting		Design
Activity-based overhead rates	$	per machine hour	$	per setup

	Silk	Nylon
Overhead assigned	$	$

What amount of overhead would be assigned to the silk and nylon product lines using the traditional approach, assuming direct labor hours were incurred evenly between the silk and nylon? How does this compare with the amount assigned using ABC in part above?

Overhead rate using traditional approach

$

per direct labor hour

	Activity-based costing (A)	Traditional costing (B)	Difference (A) (B)
Silk	$	$	$
Nylon	$	$	$