Saddle Inc. has two types of handbags: standard and custom. The controller has decided to use...
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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 1,500 1,500 Setup hours 90 360 Total estimated overhead costs are $309,000. Overhead cost allocated to the machining activity cost pool is $210,000, and $99,000 is allocated to the machine setup activity cost pool. 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 1,500 1,500 Setup hours 90 360 Total estimated overhead costs are $309,000. Overhead cost allocated to the machining activity cost pool is $210,000, and $99,000 is allocated to the machine setup activity cost pool.
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