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Question 45 6 points Save Answer Saddle Inc. has two types of hodbags standard med custom. The controller has decided to use a plaatide overhead rate based on direct Inbor costs. The president has heard of activity based costing and what to see how the results would differ if this system were used. Two activity cost pools were developed machine and machine setup. Presented below is information related to the company's operations Standard Custan | Direct labor costs $50,000 $100,000 Machine hours 1.000 1.000 Serup hours Total estimated overhead costs are $240,000. Overhead cost allocated to the machining activity cost pool is $140,000, od 100,000 is allocated to the machine setup activity cost pool. Instructions (a) Compute the overhead rate using the traditional (plaatide) approach 100 400 (b) Compute the overhead rates using the activity-based costing approach (c) Determine de difference in location between the two approaches TTTT Payah Alat V T Oli 14 cm

Answer 1

a) Overhead rate under traditional costing = 240000/150000 = $1.60 per direct labor cost

b) Overhead rate :

Machining activity = 140000/2000 = 70 per MH

Machine setup = 100000/500 = 200 per setup

c) Overhead cost allocation

	Standard	Custom
Traditional costing	10000*1.6 = 160000	80000
Activity based costing	70000+(100*200) = 90000	70000+(400*200) = 150000