Question

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 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 Standard $50,000 1,200 90 Custom $100,000 1,200 360 Total estimated overhead costs are $291,000. Overhead cost allocated to the machining activity cost pool is $192,000, and $99,000 is allocated to the machine setup activity cost pool. 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 LINK TO TEXT LINK TO TEXT VIDEO: SIMILAR EXERCISE Compute the overhead rates using the activity-based costing approach. Machining per machine hour Machine setups per setup hour LINK TO TEXT LINK TO TEXT VIDEO: SIMILAR EXERCISE

Please answer all :))

Answer 1

1) Predetermine overhead rate = 291000/150000 = 194% of direct labor cost

2) Overhead rate

Machining = 192000/2400 = 80 per hour

setup = 99000/450 = 220 per setup

3) Allocation

Traditional
Standard (50000*1.94)	97000
Custom	194000
Activity based
Standard (1200*80+90*220)	115800
Custom (1200*80+220*360)	175200