Sandhill 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 here is information related to the companys operations.

		Standard				Custom
Direct labor costs			$50,000				$100,000
Machine hours			1,000				1,000
Setup hours			100				400

Total estimated overhead costs are $247,500. Overhead cost allocated to the machining activity cost pool is $158,000, and $89,500 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.) % of direct labor cost. Predetermined overhead rate LINK TO TEXT LINK TO TEXT Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, e.g. 12.25.) Machining Machine setup LINK TO TEXT LINK TO TEXT Activity-based costing Standard Custom $ $ VIDEO: SIMILAR EXERCISE per machine hour per setup hour Determine the difference in allocation between the two approaches. (Round answers to 0 decimal places, e.g. 1,225.) Traditional costing Standard Custom $ VIDEO: SIMILAR EXERCISE