Sunland, Inc. produces two types of gas grills: a family model and a deluxe model. Sunlands controller has decided to use a plantwide 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 companys operations:

		Family Model		Deluxe Model
Direct labor costs		$77,400		$154,800
Machine hours		2,000		2,000
Setup hours		200		800

Total estimated overhead costs are $464,400. Overhead cost allocated to the machining activity cost pool is $278,640 and $185,760 is allocated to the machine setup activity cost pool.

(a)

Correct answer icon

Your answer is correct.

Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, e.g. 15.25.)

Overhead rate

$2.00

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Attempts: 1 of 3 used

(b)

Correct answer icon

Your answer is correct.

Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, e.g. 15.25.)

		Overhead Rate
Machining		$69.66 per hour
Machine set up		$185.76 per hour

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Assistance Used

Attempts: 1 of 3 used

(c)

Determine the difference in allocation between the two approaches.

		Family Model		Deluxe Model
Traditional		$enter a dollar amount		$enter a dollar amount
ABC		$enter a dollar amount		$enter a dollar amount
Difference		$enter a dollar amount		$enter a dollar amount