Saddle Inc. has two types of handbags: standard and custom. Thecontroller has decided to use a plantwide overhead rate based ondirect labor costs. The president has heard of activity-basedcosting and wants to see how the results would differ if thissystem were used. Two activity cost pools were developed: machiningand machine setup. Presented below is information related to thecompany’s operations.

		Standard		Custom
Direct labor costs		$ 50,000		$ 100,000
Machine hours		1,500		1,200
Setup hours		120		420

Total estimated overhead costs are $ 297,000. Overhead costallocated to the machining activity cost pool is $ 189,000, and $108,000 is allocated to the machine setup activity cost pool.

Compute the overhead rate using the traditional (plantwide)approach. (Round answer to 2 decimal places, e.g.12.25.)

Predetermined overhead rate

enter the overhead rate as percentage of direct labor costrounded to 2 decimal places

% of direct labor cost

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Compute the overhead rates using the activity-based costingapproach.

Machining		$ enter a dollar amount per machine hour	per machine hour
Machine setup		$ enter a dollar amount per setup hour	per setup hour

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Determine the difference in allocation between the twoapproaches.

Traditionalcosting
Standard		$ enter a dollar amount
Custom		$ enter a dollar amount
Activity-basedcosting
Standard		$ enter a dollar amount
Custom		$ enter a dollar amount