Saddle Inc. has two types of handbags: standard and custom. The controller has decided to...
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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 Custom $100,000 Direct labor costs $50,000 1,200 Machine hours Setup hours 1,500 90 420 Total estimated overhead costs are $285,900. Overhead cost allocated to the machining activity cost pool is $189,000, and $96,900 is allocated to the machine setup activity cost pool. Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, eg. 12.25.) Predetermined overhead rate % of direct labor cost e Textbook and Media Compute the overhead rates using the activity-based costing approach. Machining $ per machine hour Machine setup $ per setup hour e Textbook and Media Determine the difference in allocation between the two approaches. Traditional costing Standard $ Custom $ Activity-based costing Standard $ Custom $ e Textbook and Media
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