Exercise 18-1 (Part Level Submission) Saddle Inc. has two types of handbags: sta

Question

Exercise 18-1 (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. Direct labor costs Machine hours Setup hours 55,000 106,000 1,150 380 1,110 104 Total estimated overhead costs are 302,000. Overhead cost allocated to the machining activity cost pool is $ 197,000, and $ 105,000 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 187.57) % of direct labor cost

Explanation / Answer

a)Activity based:
Standard=(87.16*1110)+(104*216.94)=119319
Custom=(87.16*1150)+(216.94*380)=182681

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