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. Direct labor costs Machine hours Setup hours Standard $50,000 1,200 90 Custom $100,000 1,200 420 Total estimated overhead costs are $299,100. Overhead cost allocated to the machining activity cost pool is $192,000, and $107.100 is allocated to the machine setup activity cost pool.

please help and show work. Thank you!!

Answer 1

A	Total Overhead Cost	299100
B	Total Direct Labor Cost	150000	(100000+50000)
A/B*100	Predetermined Overhead Rate	199.400%	of Direct Labor Cost