Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, e.g….
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Question “Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, e.g….”
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. (Round answers to 2 decimal places, e.g. 12.25.) per machine hour Machining Machine setups per setup hour LINK TO TEXT LINK TO TEXT VIDEO: SIMILAR EXERCISE Determine the difference in allocation between the two approaches. (Round answers to 0 decimal places, e.g. 1,225.) Traditional costing Standard Custom Activity-based costing Standard 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. Standard Custom Direct labor costs $50,000 $100,000 Machine hours 1,200 90 1,500 390 Setup hours Total estimated overhead costs are $285,000. Overhead cost allocated to the machining activity cost pool is $189,000, and $96,000 is allocated to the machine setup activity cost pool.
Answer
1) Traditional Costing: Estimated overhead cost Estimated labor cost Predetermined overhead cost $285,000 $150,000 190.00% [($285000/150000) x 100] Activity Cost $99,000 Activity Activity Rate 2,700 $70.00 Per MH 480 $200.00 per set up Activity Cost $189,000 Activity Cost $99,000 Activity Cost $99,000 Activity Cost $99,000 Activity Cost $99,000 Activity Cost Activity Based: Standard custom $102,000 [(1200x $70] + (90x $200)] $183,000 [(1)500x $70]
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