Question

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. Custom Standard $50,000 Direct labor costs $100,000 1,200 Machine hours 1,200 Setup hours 90 390 Total estimated overhead costs are $297,600. Overhead cost allocated to the machining activity cost pool is $192,000, and $105,600 is allocated to the machine setup activity cost pool.

Answer 1

6 A B с 1 Particulars Amount 2 Total estimated overhead costs $ 297,600 3 Total direct labor cots $ 150,000 4 Plantwide overhead rate 198.40% 5 6 Machining Setup 7 Overhead cost $ 192,000 $ 105,600 8 Cost drivers 2400 480 9 Activity rate $ 80$ 220 10 11 Traditional costing 12 Standard $ 99,200 13 Custom $ 198,400 14 15 Activity-based costing 16 Standard $ 115,800 17 Custom $ 181,800

5 A B с 1 Particulars Amount 2 Total estimated overhead costs 297600 3 Total direct labor cots =50000+100000 4 Plantwide overhead rate =+B2/B3 5 6 Machining Setup 7 Overhead cost 192000 105600 8 Cost drivers =1200+1200 =90+390 9 Activity rate =+B7/B8 =+07/08 10 11 Traditional costing 12 Standard =50000*B4 13 Custom =100000*B4 14 15 Activity-based costing 16 Standard =+(1200*B9) +(90*09) 17 Custom =+(1200*B9) +(390*С9) 192