Question
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.
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 companys operations.
Standard | Custom | |||
---|---|---|---|---|
Direct labor costs | 50,000 | 100,000 | ||
Machine hours | 1,500 | 1,500 | ||
Setup hours | 90 | 420 |
Total estimated overhead costs are $312,000. Overhead cost allocated to the machining activity cost pool is $210,000, and $102,000 is allocated to the machine setup activity cost pool.
Compute the overhead rate using the traditional(plantwide) approach. (round answer to 2 decimal places, e.g. 12.25.)
Predetermined overhead rate _____________ % of direct labor cost.
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