Crane Inc. makes two types of handbags: standard and custom. The controller has decided to use...

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Crane Inc. makes two types of handbags: standard and custom. The controller has decided to use a plant- wide overhead rate based on direct labour 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 (machine hours) and machine set-up (number of set- ups). The total estimated machine hours is 1,500, and the total estimated number of setups is 500. Presented below is information related to the company's operations. Standard Custom Direct labour costs $50,000 $100,000 Machine hours 500 1,000 Set-up hours 100 400 Total estimated overhead costs are $270,000. The overhead cost allocated to the machining activity cost pool is $168,000, and $102,000 is allocated to the machine set-up 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 Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, e.g. 12.25.) Machining per machine hour $4 Machine setup per setup hour %24 Determine the difference in allocation between the two approaches. (Round answers to 0 decimal places, e.g. 1,225.) Traditional costing Standard $1 Custom 24 Activity-based costing Standard %24 Custom %24 Crane Inc. makes two types of handbags: standard and custom. The controller has decided to use a plant- wide overhead rate based on direct labour 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 (machine hours) and machine set-up (number of set- ups). The total estimated machine hours is 1,500, and the total estimated number of setups is 500. Presented below is information related to the company's operations. Standard Custom Direct labour costs $50,000 $100,000 Machine hours 500 1,000 Set-up hours 100 400 Total estimated overhead costs are $270,000. The overhead cost allocated to the machining activity cost pool is $168,000, and $102,000 is allocated to the machine set-up 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 Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, e.g. 12.25.) Machining per machine hour $4 Machine setup per setup hour %24 Determine the difference in allocation between the two approaches. (Round answers to 0 decimal places, e.g. 1,225.) Traditional costing Standard $1 Custom 24 Activity-based costing Standard %24 Custom %24

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