Saddle Inc. has two types of handbags: standard and custom. The controller has decided to use...

Transcribed Image Text:

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 1,500 Setup hours 90 420 Total estimated overhead costs are $301,200. Overhead cost allocated to the machining activity cost pool is $189,000, and $112,200 is allocated to the machine setup activity cost pool. (a) Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, eg. 12.25.) Predetermined overhead rate % of direct labor cost 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 1,500 Setup hours 90 420 Total estimated overhead costs are $301,200. Overhead cost allocated to the machining activity cost pool is $189,000, and $112,200 is allocated to the machine setup activity cost pool. (a) Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, eg. 12.25.) Predetermined overhead rate % of direct labor cost