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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.

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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