Question
Waterway Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor
Waterway 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 $50,000 $100,000 Machine hours Setup hours 1,200 1,500 90 420 Total estimated overhead costs are $301,200. Overhead cost allocated to the machining activity cost pool is $189,000, and $112,200 is allocated to the machine setup activity cost pool.
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