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. Standard Custom Direct labor costs Maching hours $50,000 $100,000 1,200 1,200 90 390 Setup hours Total estimated overhead costs are $292,800. Overhead cost allocated to the machining activity cost poolis $192,000, and $100,000 is a located to the machine setup activity cost pool. ✓ Your answer is correct. Compute the overhead rate using the traditional plantside) approach. (Round answer to 2 decimal places.eg. 12.25.) Predetermined overhead rats 1952 of direct labor cost e Textbook and Media Attempts: 3 of 7 used Compute the overhead rates using the activity-based costing approach Machining per machine hour Machine setups per setup hour

Answer 1

b)
	Predetermined Overhead Rate Using Activity Based Costing
	Machining = $192000 /2400 Machine Hours
		=$80 per machine hour
	Machine Set-Up
	=$100900/ (90+390) set ups
	=$100900/480 setups
	210.21	per setup
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