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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. Standard Custom Direct labor costs $47,000 1,440 $99,000 1,440 Machine hours Setup hours 103 430 Total estimated overhead costs are $298,000. Overhead cost allocated to the machining activity cost pool is $197,000, and $101,000 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 LINK TO TEXT LINK TO TEXT VIDEO: SIMILAR EXERCISE Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, e.g. 12.25.) Machining per machine hour $ Machine setup per setup hour $ Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, e.g. 12.25.) Machining per machine hour $ Machine setup per setup hour $ LINK TO TEXT VIDEO: SIMILAR EXERCISE Determine the difference in allocation between the two approaches. (Round answers to 0 decimal places, e.g. 1,225.) Traditional costing Standard $ Custom $ Activity-based costing. Standard $ Custom $
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