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Determine the difference in allocation between the two approaches. (Round answers to 0 decimal places, e.g. 1,225.)

Determine the difference in allocation between the two approaches. (Round answers to 0 decimal places, e.g. 1,225.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 $59,000 $119,000 Machine hours 1,350 1,180 Setup hours 98 410 Total estimated overhead costs are $297,000. Overhead cost allocated to the machining activity cost pool is $200,000, and $97,000 is allocated to the machine setup activity cost pool.
Transcribed Image Text: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 $59,000 $119,000 Machine hours 1,350 1,180 Setup hours 98 410 Total estimated overhead costs are $297,000. Overhead cost allocated to the machining activity cost pool is $200,000, and $97,000 is allocated to the machine setup activity cost pool.
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 %24 %24 %24 %24
Transcribed Image Text: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 %24 %24 %24 %24
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