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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 companys operations.

		Standard		Custom
Direct labor costs		$60,000		$120,000
Machine hours		1,300		1,140
Setup hours		107		420

Total estimated overhead costs are $296,000. Overhead cost allocated to the machining activity cost pool is $198,000, and $98,000 is allocated to the machine setup activity cost pool.

Part 1

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

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Part 2

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

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Part 3

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

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