CALCULATOR PRINTER VERSION BACK NEXT Exercise 4-1 (Video) 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. Custom Direct labor costs Machine hours Setup hours Standard $50,000 1,200 $100,000 1,200 390 90 Total estimated overhead costs are $292,800. Overhead cost allocated to the machining activity cost pool is $192,000, and $100,800 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 % of direct labor cost LINK TO TEXT LINK TO TEXT VIDEO: SIMILAR EXERCISE Compute the overhead rates using the activity-based costing approach. Machining $ per machine hour Machine setup $ per setup hour LINK TO TEXT LINK TO TEXT VIDEO: SIMILAR EXERCISE Determine the difference in allocation between the two approaches. Traditional costing Standard Custom $ Activity-based costing Standard $ Custom LINK TO TEXT LINK TO TEXT