Sheridan, Inc. produces two types of gas grills: a family model and a deluxe model. Sheridan's controller has decided to use a plantwic overhead rate based on direct labor costs. The president of the company recently 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: Family Model Deluxe Model Direct labor costs Machine hours Setup hours $72,300 $144,600 2,000 2,000 200 800 Total estimated overhead costs are $433,800. Overhead cost allocated to the machining activity cost pool is $260,280 and $173,520 is allocated to the machine setup activity cost pool. Sheridan, Inc. decided to implement the activity-based costing approach and was quite successful in its use. However, the controller is wondering if instead of only two activity cost pools, they should expand to three activity cost pools based on the following: Family Model Deluxe Model Direct labor costs $72,300 $144,600 Machine hours 2,000 2,000 Setup hours 200 800 Packaging hours 50 75 The estimated overhead of $433,800 is allocated as follows: machining activity cost pool $231,360, machine set up $163,880 and packaging $38,560. (1) Determine the overhead rates using the activity-based costing approach with three cost pools. (Round answers to 2 decimal places, eg. 15.25.) Machining Machine set up Packaging Overhead Rate per hour per hour per hour (2) Calculate the overhead allocation for the family model and the deluxe model using three activity cost pools. Family model Deluxe model Overhead Allocation What is the difference in allocation between two activity cost pools and three activity cost pools? Is the difference in allocation worth using the third activity cost pool? What is the difference in allocation between two activity cost pools and three activity cost pools? Is the difference in allocation worth using the third activity cost pool? Difference $ The additional cost pool the overhead cost allocation significantly.