Exercise 17-1 Saddle 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. Direct labor costs Machine hours Setup hours Standard Custom $52,000 $120,000 1,170 1,100 420 Total estimated overhead costs are $301,000. Overhead cost allocated to the machining activity cost pool is $197,000, and $104,000 is allocated to the machine setup activity cost pool EYour answer is incorrect. Try again. Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, e.g. 12.25.) Predetenmined overhead rate 1.75 % of direct labor cost LINK TO TEXT LINK TO TEXT [ Your answer is correct. Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, e.g. 12.25.) Machining Machine setup200.38 per setup hour 86.78 per machine hour SHOW SOLUTION SHOW ANSWER LINK TO TEXT LINK TO TEXT Your answer is incorrect. Try again. Determine the difference in allocation between the two approaches. (Round answers to 0 decimal places, e.g. 1,225.,) Traditional costin Standard Custom Activity-based costing Standard Custom