Saddle Inc. has two types of bags: standard and custom. The controller has decided to use a plant-wide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would be different if this system were used. Two groups of activity costs were developed: machining and machine setup. Information related to the company's operations is presented below.

		Standard		Habit
Direct labor costs		$40,000		$110,000
machine hours		1,450		1,460
installation hours		103		370

Total estimated overhead costs are $295,000. The indirect cost assigned to the machining activity cost pool is $196,000, and $99,000 is assigned to the machine setup activity cost pool.

Calculate the overhead rate using the traditional approach (whole plant). (Round your answer to 2 decimal places, for example, 12.25.)

Default Overhead Rate

enter the default overhead rate in percentages of direct labor cost rounded to 2 decimal places

% of direct labor cost

Electronic textbook and media

Calculate overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, for example, 12.25.)

machining		$enter a dollar amount per machine hour rounded to 2 decimal places	per hour machine
Machine configuration		$enter a dollar amount per setup hour rounded to 2 decimal places	per setup hour

Electronic textbook and media

Determine the difference in allocation between the two approaches. (Round answers to 0 decimal places, for example, 1225.)

traditional costing
Standard		$enter a dollar amount rounded to 0 decimal places
Habit		$enter a dollar amount rounded to 0 decimal places
Activity-Based Costing
Standard		$enter a dollar amount rounded to 0 decimal places
Habit		$enter a dollar amount rounded to 0 decimal places

Answer rating: 100% (QA)

We have all the information necessary for the computation Lets proceed First we will calculate the overhead rate using the traditional approach The to... View the full answer