Question
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 companys operations. Standard Custom Direct labor costs $50,000 $100,000 Machine hours 1,200 1,200 Setup hours 120 420 Total estimated overhead costs are $289,200. Overhead cost allocated to the machining activity cost pool is $192,000, and $97,200 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 enter the overhead rate as percentage of direct labor cost rounded to 2 decimal places % of direct labor cost eTextbook and Media Compute the overhead rates using the activity-based costing approach. Machining $enter a dollar amount per machine hour per machine hour Machine setup $enter a dollar amount per setup hour per setup hour eTextbook and Media Determine the difference in allocation between the two approaches. Traditional costing Standard $enter a dollar amount Custom $enter a dollar amount Activity-based costing Standard $enter a dollar amount Custom $enter a dollar amount
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