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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.

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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. 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. Custom Standard $50,000 Direct labor costs $100,000 1,200 Machine hours 1,200 Setup hours 90 390 Total estimated overhead costs are $297,600. Overhead cost allocated to the machining activity cost pool is $192,000, and $105,600 is allocated to the machine setup activity cost pool. (c) Determine the difference in allocation between the two approaches. Traditional costing Standard $ Custom $ Activity-based costing Standard $ Custom $

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