Part a) Compute the overhead rates using the activity-based costing approach. (i.e. $ per machine hour and $ per setup hour).

Part b) Determine the difference in allocation between the two approaches.

Traditional costing (standard and custom)

Activity-based costing (standard and custom).

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. Total estimated overhead costs are $285,900. Overhead cost allocated to the machining activity cost pool is $189,000, and $96,900 is allocated to the machine setup activity cost pool