Question 20 Elle Inc. makes two types of handbags: standard and custom. The controller has decided to use a plant-wide overhead rate based on direct labour 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 set-up. Presented below is information related to the company's operations. Custom Direct labour costs Machine hours Set-up hours Standard $50,000 500 100 $100,000 1,000 400 Total estimated overhead costs are $217,500. The overhead cost allocated to the machining activity cost pool is $157,500, and $60,000 is allocated to the machine set-up activity cost pool. Calculate the overhead rate using the traditional (plant-wide) approach. Predetermined overhead rate % of direct labour cost LINK TO TEXT LINK TO TEXT VIDEO: SIMILAR EXERCISE Calculate the overhead rate using the activity-based costing approach. Cost Pool Overhead Rate Machining per machine hour Machine set-up per set-up hour - LINK TO TEXT LINK TO TEXT VIDEO: SIMILAR EXERCISE Determine the difference in allocation between the two approaches. (Enter negative answers using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).) Traditional costing Activity-based costing Difference (A) - (B) (A) (B) Standard $ 4 Custom A