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		$45,000		$113,000
Machine hours		1,140		1,110
Setup hours		106		430

Total estimated overhead costs are $308,000. Overhead cost allocated to the machining activity cost pool is $195,000, and $113,000 is allocated to the machine setup activity cost pool.

Question 1 of 2 8.33/25 View Policies Show Attempt History Current Attempt in Progress 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 $45,000 $113,000 Machine hours 1.140 1.110 Setup hours 106 430 Total estimated overhead costs are $308,000. Overhead cost allocated to the machining activity cost pool is $195,000, and $113,000 is allocated to the machine setup activity cost pool. Your answer is correct. Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, e.g. 12.25.) Machining $ 86.66 per machine hour Machine setup $ 210.82 per setup hour e Textbook and Media Your answer is incorrect. Determine the difference in allocation between the two approaches. (Round answers to decimal places, e.g. 1,225.) Traditional costing Standard $ Custom $ Activity-based costing Standard $ Custom $