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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 company's operations. Direct labor costs Machine hours Setup hours Standard $50,000 1.500 Custom 3100.000 1.500 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 Compute the overhead rates using the activity-based costing approach. Machining per machine hour Machine setup per setup hour Determine the difference in allocation between the two approaches. Traditional costing Standard Custom Activity based costing Standard Custom Click if you would like to Show Work for this question: Open Show Work
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