Exercise 4-1 (Video) 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 $50,000 1,500 90 Custom $100,000 1,500 420 Total estimated overhead costs are $306,900. Overhead cost allocated to the machining activity cost pool is $210,000, and $96,900 is allocated to the machine setup activity cost pool. Your answer is incorrect. Try again. Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, e.g. 12.25.) Predetermined overhead rate 2.05 % of direct labor cost LINK TO TEXT LINK TO TEXT Your answer is partially correct. Try again. Compute the overhead rates using the activity-based costing approach. Machining 70 per machine hour Machine setup 186.35 per setup hour LINK TO TEXT LINK TO TEXT VIDEO: SIMILAR EXERCISE VIDEO: SIMILAR EXERCISE Your answer is incorrect. Try again. Determine the difference in allocation between the two approaches. Traditional costing Standard Custom Activity-based costing Standard Custom Click if you would like to Show Work for this question: Open Show Work