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Saddle Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor

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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 $50,000 $100,000 Machine hours 1,200 Setup hours 120 1,500 360 Total estimated overhead costs are $294,600. Overhead cost allocated to the machining activity cost pool is $189,000, and $105,600 is allocated to the machine setup activity cost pool. Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, eg. 12.25) Predetermined overhead rate 1.96 % of direct labor cost Compute the overhead rates using the activity-based costing approach. Machining 220 per machine hour

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