Question

Need help on two red portions

TIG Weygandt, Managerial Accounting, se U s Help System Announcemen CALCULATOR PRINTER VERSION BACK Exercise 4-1 (Video) 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 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 Standard $50,000 1,200 120 Custom $100,000 1,200 300 Total estimated overhead costs are $304,200 Overhead cost allocated to the machining activity cost pool is $192,000, and $112,200 is allocated to the machine setup activity cost pool x Your answer is incorrect. Try again. Compute the overhead rate using the traditional (plantwide) approach (Round answer to 2 decimal places, ap. 12.25.) Predetermined overhead rate 202 % of direct labor cost LINK TO TEXT LINK TO TEXT VIDEOI SIMILAR EXERCISE your answer is correct. Compute the overhead rates using the activity based costing approach Machining J 8 0 per machine hour Machine setup 220 per setup hour

Answer 1

Predetermined rate = Estimated overhead costs/Estimated Labor cost

= 304200/(50,000+100,000)

= 202.8% of Direct labor cost

Allocation under traditional costing is as follows:

Standard – 50,000*202.8% = $101,400

Custom – 100,000*202.8% = $202,800