addle 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 $45,000 $113,000 Machine hours 1,140 1,110 Setup hours 106 430 Total estimated overhead costs are $308,000. Overhead cost allocated to the machining activity cost pool is $195,000, and $113,000 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 enter the predetermined overhead rate in percentages of direct labor cost rounded to 2 decimal places % of direct labor cost
Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, e.g. 12.25.)
Machining |
$enter a dollar amount per machine hour rounded to 2 decimal places |
per machine hour | |
---|---|---|---|
Machine setup |
$enter a dollar amount per setup hour rounded to 2 decimal places |
per setup hour |
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Determine the difference in allocation between the two approaches. (Round answers to 0 decimal places, e.g. 1,225.)
Traditional costing | ||
---|---|---|
Standard |
$enter a dollar amount rounded to 0 decimal places |
|
Custom |
$enter a dollar amount rounded to 0 decimal places |
|
Activity-based costing | ||
Standard |
$enter a dollar amount rounded to 0 decimal places |
|
Custom |
$enter a dollar amount rounded to 0 decimal places |
1 | |||
Total Overhead cost | 308000 | ||
Divide by Total Direct labor costs | 158000 | =45000+113000 | |
Predetermined overhead rate | 194.94% | % of direct labor cost | |
2 | |||
Machining | 86.67 | per machine hour | =195000/(1140+1110) |
Machine setup | 210.82 | per setup hour | =113000/(106+430) |
3 | |||
Traditional costing: | |||
Standard | 87723 | =45000*194.94% | |
Custom | 220282 | =113000*194.94% | |
Activity-based costing: | |||
Standard | 121151 | =(1140*86.67)+(106*210.82) | |
Custom | 186856 | or 186857 | =(1110*86.67)+(430*210.82) |
addle Inc. has two types of handbags: standard and custom. The controller has decided to use...
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 $40,000 $110,000 Machine hours 1,450 1,460 Setup hours 103 370...
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 $51,000 $116,000 Machine hours 1,410 1,330 Setup hours 96 400...
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 $47,000 $99,000 Machine hours 1,440 1,440 Setup hours 103 430...
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 $52,000 $120,000 Machine hours 1,170 1,100 Setup hours 99 420...
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 $60,000 $120,000 Machine hours 1,300 1,140 Setup hours 107 420...
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 $50,000 $100,000 Machine hours 1,200 1,500 Setup hours 90 390...
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 1.200 390...
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
$53,000
$100,000
Machine hours
1,270
1,280
Setup hours
104
400...
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 $50,000 $100,000 Machine hours 1,200 1,500 Setup hours 90 390...
Question 10 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 $50,000 Direct labor costs Machine hours Setup hours 1,200 $100,000 1,200...