Question

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 $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

0 0
Add a comment Improve this question Transcribed image text
Answer #1
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)
Add a comment
Know the answer?
Add Answer to:
Saddle Inc. has two types of handbags: standard and custom. The controller has decided to use...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • 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...

    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...

    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...

    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...

    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...

    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...

    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...

    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...

    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...

    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...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT