Exercise 17-1 Saddle Inc. has two types of handbags: standard and custom. The controller has...
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Exercise 17-1 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 Customm Direct labor costs Machine hours Setup hours $50,000 1,000 100 $100,000 1,000 400 Total estimated overhead costs are $240,000. Overhead cost allocated to the machining activity cost pool is $140,000, and $100,000 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.) Predetermined overhead rate % of direct labor cost Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, e.g. 12.25.) Machining Machine setup per machine hour per setup hour Determine the difference in allocation hetween the two anproaches, (Round answers to 0 deimal places, e.a. 1.225
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