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 Direct labor costs $50,000 $100,000 Machine hours 1,200 1,200 Setup hours 120 420 Total estimated overhead costs are $305,400. Overhead cost allocated to the machining activity cost pool is $192,000, and $113,400 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. 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
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