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 |
Total estimated overhead costs are $301,000. Overhead cost
allocated to the machining activity cost pool is $197,000, and
$104,000 is allocated to the machine setup activity cost pool.
Incorrect answer iconYour answer is incorrect.
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
Partially correct answer iconYour answer is partially correct.
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
Partially correct answer iconYour answer is partially correct.
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 |
eTextbook and Media
Answer | ||
PREDETERMINE OVERHEAD RATE = Overhead cost*100/direct labour cost |
||
301000*100/172000 | ||
Predetermine overhead rate = 175% | ||
COMPUTE OVERHEAD RATE UNDER ABC: | ||
Machining = 197000/2270 = 86.78 per machine hour | ||
set up = 104000/519 = 200.39 per set up | ||
DETERMINE THE DIFFERENCE IN ALLOCATION BETWEEN THE TWO APPROACHES : | ||
TRADITION COSTING | ||
Standard (52000*175%) | $ 91,000 | |
custom (120000*175%) | $210,000 | |
ACTIVITY BASED COSTING | ||
Standard | ||
Machining (1170*86.78) | $101,533 | |
Setup (99*200.39) | $ 19,839 | $121,371 |
Custom | ||
Machining (1100*86.78) | $ 95,458 | |
Setup (420*200.39) | $ 84,164 | $179,622 |
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...
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...
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. 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. Standard Direct labor costs Custom $100,000 1,200 360 $50,000 1,500 90 Machine hours Setup hours...
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...