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 Machine hours Setup hours $51,000 1,420 103 112,000 1,470 370 Total estimated overhead costs are $300,000. Overhead cost allocated to the machining activity cost pool is $197,000, and $103,000 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
Determine the difference in allocation between the two approaches. (Round answers to o decimal places, e. g. 1,225.) per machine hour per setup hour Standard Custom Activity-based costing Standard Custom