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 .* Standard Custom Direct labor costs $ 45, 000 $1 13, 000 Machine hours 1 , 140 1 , 110 Setup hours 106 430 Total estimated overhead costs are $308, 000 . Overhead cost allocated to the machining activity cost pool is $195 , 000 , and $ 1 13, 000 is allocated to the machine setup activity cost pool ." ( 2 ) V Your answer is correct . Compute the overhead rate using the traditional ( plantwide ) approach . ( Round answer to 2 decimal places , e.g . 12.25. ) Predetermined overhead rate* 194. 94| % of direct labor cost* @ Textbook and Media Attempts : 2 of 3 used ( b ) `` Your answer is correct . Compute the overhead rates using the activity - based costing approach . ( Round answers to 2 decimal places , e .8 . 12.25. ) Machining 86.67 \\ per machine hour* Machine setup 210.82 \\ persetup hour @ Textbook and Media Attempts : 1 of 3 used ( C ) Your answer is partially correct . Determine the difference in allocation between the two approaches . ( Round answers to O decimal places , e.8. 1 , 225. ) Traditional costing Standard 87720 CUSTOM 220280 Activity - based costing Standard 121151 Custom 189456\\