Saddle Inc. has two types of handbags: standard and custom. The controller has d

Question

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.

FIND STANDARD AND CUSTOM UNDER TRADITIONAL COSTING!!!!!!

Standard Custom Direct labor costs Machine hours Setup hours $58,000 1,190 109 $97,000 1,220 400 Total estimated overhead costs are $304,000, overhead cost allocated to the machining activity cost pool is $197,000, and $107,000 ts allocated to the machine setup actvity cost pool. ?Your answer is correct. compute the overhead rate using the traditional (clantwide) approach. (Round answer to 2 declmal places, e.g 12.25.) Predetermined overhead rate 196.13% of direct labor cost SHOW SOLUTION LINK TO TEXT LINK TO TEXT VIDEO: SIMILAR EXERCISE ?Your answer is correct. Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, e.g. 12.25.) Machining 81.74 per machine hour loc All Rights peserved. A Division of John Wiley 2 Sonsin pe here to search

Explanation / Answer

Calculate overhead allocated under traditional costing :

Standard = 58000*196.13% = $113755

Custom = 97000*196.13% = $190246

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