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 1,500 Setup hours 90 360 Total estimated overhead costs are $313,500. Overhead cost allocated to the machining activity cost pool is $210,000, and $103,500 is allocated to the machine setup activity cost pool. Your answer is correct. Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, e.g. 12.25.) Predetermined overhead rate enter the overhead rate as percentage of direct labor cost rounded to 2 decimal places % of direct labor cost LINK TO TEXT LINK TO VIDEO Your answer is correct. Compute the overhead rates using the activity-based costing approach. Machining $enter a dollar amount per machine hour per machine hour Machine setup $enter a dollar amount per setup hour per setup hour LINK TO TEXT LINK TO VIDEO Your answer is incorrect. Try again. Determine the difference in allocation between the two approaches. Traditional costing Standard $enter a dollar amount Custom $enter a dollar amount Activity-based costing Standard $enter a dollar amount Custom $enter a dollar amount

Name: Saddle Inc. has two types of handbags: standard and custom. The contro
Uploaded: 2024-03-20T06:33:06.000Z
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Description: 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 th

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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	1,500
Setup hours	90	360

Total estimated overhead costs are $313,500. Overhead cost allocated to the machining activity cost pool is $210,000, and $103,500 is allocated to the machine setup activity cost pool.


	Your answer is correct.

Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, e.g. 12.25.)

Predetermined overhead rate

enter the overhead rate as percentage of direct labor cost rounded to 2 decimal places

% of direct labor cost


LINK TO TEXT	LINK TO VIDEO


	Your answer is correct.

Compute the overhead rates using the activity-based costing approach.

Machining		$enter a dollar amount per machine hour	per machine hour
Machine setup		$enter a dollar amount per setup hour	per setup hour


LINK TO TEXT	LINK TO VIDEO


	Your answer is incorrect. Try again.

Determine the difference in allocation between the two approaches.

Traditional costing
Standard		$enter a dollar amount
Custom		$enter a dollar amount

Activity-based costing
Standard		$enter a dollar amount
Custom		$enter a dollar amount

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