Answer -
The predetermined overhead rate using the traditional approach is 202.80%
Per machine hour rate under activity based costing is $80 and the machine setup per hour is $220
.
Traditional Costing | |
Standard | $ 101,400 |
Custom | $ 202,800 |
.
Activity-Based Costing | |
Standard | $ 122,400 |
Custom | $ 181,800 |
.
Explanation -
Calculation of predetermined overhead rate using the traditional approach -
Traditional Overhead Rate = Estimated Overhead / Direct Labor Costs
Traditional Overhead Rate = $304,200 / $150,000 = 202.80%
Working Note :
Direct Labor Cost = Standard Labor Cost + Custom Labor Cost
Direct Labor Cost = $50,000 + $100,000 = $150,000
.
Calculation of per machine hour rate under activity based costing -
Per Machine Hour = Cost of Machine / Number of Machine Hours
Per Machine Hour = $192,000 / 2,400
Per Machine Hour = $80
.
Calculation of machine set-up per hour under activity based costing -
Per Machine Set-up = Cost of Machine Set-up / Number of Machine Set-up Hours
Per Machine Set-up = $112,200 / 510
Per Machine Set-up = $220
.
Working Notes :
Number of Machine Hours = Standard Machine Hours + Custom Machine Hours
Number of Machine Hours = 1,200 + 1,200 = 2,400
.
Number of Machine Set-up Hours = Standard Machine Set-up Hours + Custom Machine Set-up Hours
Number of Machine Set-up Hours = 120 + 390 = 510
.
Difference in allocation based on Traditional costing -
Details | Standard | Custom |
Direct labor cost of Standard | ||
[ 50,000 * 202.80% ] | $ 101,400 | |
Direct labor cost of Custom | ||
[ 100,000 * 202.80% ] | $ 202,800 | |
Total | $ 101,400 | $ 202,800 |
.
Difference in allocation based on activity-based costing -
Details | Standard | Custom |
Machining : | ||
Machine Hours of Standard | ||
[ 1,200 * 80 ] | $ 96,000 | |
Machine Hours of Custom | $ 96,000 | |
Machine Setup : | ||
Machine setup of standard [120 * 220] | $ 26,400 | |
Machine Setup of Custom [390 * 220] | $ 85,800 | |
Total | $ 122,400 | $ 181,800 |
.
Please give a positive rating if you are satisfied with this solution and if you have any query kindly ask.
Thanks!
NEXT CALCULATOR PRINTER VERSION BACK Saddle Inc. has two types of handbags: standard and custom. The...
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 1,200 Setup hours 90 420...
please help and show work 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...
Question 5 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 1,200 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 1,500 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 Machine hours Setup hours $50,000 $100,000 1,200 1,500 120 360...
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 1,500 1,200 Setup hours 90 420...
please help and show work 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...
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 1,500 1,200 Setup hours 90 360...
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 120 360...