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 |
Total estimated overhead costs are $295,000. Overhead cost
allocated to the machining activity cost pool is $196,000, 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 |
enter the predetermined overhead rate in percentages of direct labor cost rounded to 2 decimal places |
% of direct labor cost |
eTextbook and Media
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 |
eTextbook and Media
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 estimated overhead | 295000 | ||
Divide by Total Direct labor costs | 150000 | =40000+110000 | |
Predetermined overhead rate | 196.67 | % of direct labor cost | |
2 | |||
Machining | 67.35 | per machine hour | =196000/(1450+1460) |
Machine setup | 209.30 | per setup hour | =99000/(103+370) |
3 | |||
Traditional costing: | |||
Standard | 78668 | =40000*196.67% | |
Custom | 216337 | =110000*196.67% | |
Activity-based costing : | |||
Standard | 119215 or 119216 | =(1450*67.35)+(103*209.30) | |
Custom | 175772 | =(1460*67.35)+(370*209.30) |
Saddle 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 $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...
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...
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...