Coronado, Inc. produces two types of gas grills: a family model and a deluxe model. Coronado's controller
Question:
Coronado, Inc. produces two types of gas grills: a family model and a deluxe model. Coronado's controller has decided to use a plant wide overhead rate based on direct labor costs. The president of the company recently heard of activity-based costing and wants to see how the results would differ if the system were used. Two activity cost pools were developed: machining and machine setup. Family model Direct Labor Costs = $72900, Machine Hours = 2000 and Setup Hours = 200. Deluxe Model Direct Labor Costs = $145800, Machine Hours =2000 and Setup Hours =800. Total estimated overhead costs are $437400. Overhead cost allocated to the machining activity cost pool is $262440 and $174960 is allocated to the machine setup activity cost pool. Compute the overhead rate using traditional (plantwide) approach.