Exercise 17-1 (Part Level Submission) Standard Custom (a) Open Show Work SHOW SO
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Exercise 17-1 (Part Level Submission)
Standard
Custom
(a)
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(b)
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(c)
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Exercise 17-1 (Part Level Submission)
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 $52,000 $120,000 Machine hours 1,170 1,100 Setup hours 99 420Total estimated overhead costs are $301,000. Overhead cost allocated to the machining activity cost pool is $197,000, and $104,000 is allocated to the machine setup activity cost pool.
(a)
Your answer is correct. 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 Click if you would like to Show Work for this question:
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Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, e.g. 12.25.)Machining $ per machine hour Machine setup $ per setup hour Click if you would like to Show Work for this question:
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Explanation / Answer
a) Predetermined overhead rate= total estimed overhead cost/total direct labor cost 301,000 /(52000+120000) 175% of direct labor cost b) overhead rates using activity based costing approach Machining 197,000/(1170+1100) 86.78 Machine setup 104,000/(99+420) 200.39 Machining 86.78 per machine hour Machine setup 200.39 per setup hour
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