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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 difter 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 $50,000 Custom $119,000 Direct labor costs Machine hours Setup hours 1,390 1,280 105 380 Total estimated overhead costs are $306,000Overhead cost allocated to the machining activity cost pool is $197,000, and $109,000 is allocated to the machine setup activity cost pool. Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, eg. 12.25) Predetermined overhead rate % of direct labor cost eTextbook and Media Compute the overhead rates using the activity based costing approach. (Round answers to 2 decimal places, eg, 12.25.) Machining per machine hour Machining $ per machine hour Machine setup $ per setup hour e Textbook and Media Determine the difference in allocation between the two approaches. (Round answers to decimal places, eg. 1,225.) Traditional costing Standard $ Custom $ Activity-based costing Standard $ Custom $
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