Need help with this problem 4-1

A, B and C

Thank you

Exercise 4-1 (also in your book at end of chapter)

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 (machine hours) and machine setup (number of setups). The total estimated machine hours is 2,000, and the total estimated number of setups is 500. Presented below is information related to each product's use of cost drivers.

	Standard	Custom
Direct Labor Costs	$ 50,000	$ 100,000
Machine Hours	1,000	1,000
Number of Setups	100	400

Total estimated overhead costs are $240,000. Overhead cost allocated to the machining activity cost pool is $140,000, and $100,000 is allocated to the machine setup activity cost pool.

Instructions

(a) Compute the overhead rate using the traditional (plantwide) approach.

(b) Compute the overhead rates (for machining & setups) using the A-B-C approach.

(c) Determine the difference in allocation between the two approaches.

(a) POR = Plantwide Overhead Rate

(Est Overhead / Est Dir Lbr $$) = % Dir Lbr cost
The math here (erase this text)	answer here (erase text)

(Info for (b) calculating ABC rate)

Cost Pools	Cost Drivers	Est. Overhead
Machining	Machine Hours	$ 140,000
Machine Setup	Setups	100,000

(b)

A-B-C Overhead Rate - machining
The math here (erase this text)	=	answer here (erase text)	per machine hour

Show work: $$ / (TOTAL machine hrs) $ answer

A-B-C Overhead Rate - setups
The math here (erase this text)	=	answer here (erase text)	per setup

Show work: $$ / (TOTAL setups) $ answer

(c)

Traditional Costing	Standard	Customer
$ 50,000 x ______ POR % (a)
$100,000 x ______ POR% (a)
Column Totals

Activity-Based Costing	Standard	Customer
Machining:
Machine Setup:
Column Totals