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		1,200		1,200
Setup hours		90		420

Total estimated overhead costs are $ 294,000. Overhead cost allocated to the machining activity cost pool is $ 192,000, and $ 102,000 is allocated to the machine setup activity cost pool.

Determine the difference in allocation between the two approaches.

Traditional costing
Standard		$ enter a dollar amount
Custom		$ enter a dollar amount
Activity-based costing
Standard		114000
Custom		180000