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 | | $58,000 | | $97,000 | Machine hours | | 1,190 | | 1,220 | Setup hours | | 109 | | 400 | Total estimated overhead costs are $304,000. Overhead cost allocated to the machining activity cost pool is $197,000, and $107,000 is allocated to the machine setup activity cost pool. | | | |