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

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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 1,500 1,200 Setup hours 90 420 Total estimated overhead costs are $291,000. Overhead cost allocated to the machining activity cost pool is$189,000, and $102,000 is allocated to the machine setup activity cost pool. Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, eg 12.25) Predetermined overhead rate % of direct labor cost Compute the overhead rates using the activity-based costing approach. Machining$ per machine hour Machine setup $per setup hour Determine the difference in allocation between the two approaches. Traditional costing Standard$ Custom $Activity-based costing Standard$ Custom

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