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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
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 Machine hours Setup hours $50,000 1,200 120 $100,000 1,200 390 Total estimated overhead costs are $299,100. Overhead cost allocated to the machining activity cost pool is $192,000, and $107,100 is allocated to the machine setup activity cost pool. (a) Your answer is correct. Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, eg. 12.25.)
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