7:15 PM edugen.wileyplus.com T-Mobile Exercise 17-1 Saddle Inc. has two types of
ID: 2540385 • Letter: 7
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7:15 PM edugen.wileyplus.com T-Mobile Exercise 17-1 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. Direct abor Setup hours Total estimated overhead costs are $298,000. Overhead cost allocated to the machining activity cost pool is $197,000, and $101,000 is allocated to the machine setup activity cost pool. Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, e.g. 12.25.) Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, e.g. 12.25) Machining Determine the difference in allocation between the two approaches. (Round answers to 0 decimal places, e.g. 1,225.) Traditienal cestingExplanation / Answer
Req: Pre-determined overheads rate: Estimated overheads / Direct labour cost *100 $ 298,000 / (47,000+99000) *100= 204.11% Pre-determined OH rate 204.11% of labour cost Req: Machining Activity rate: $ 197,000 / (1440+1440) = $68.40 Machine setup : $ 101000 / (103+430) = $189.49 per setup Overheads assigned: Standard Custom MH 1440 1440 Setups 103 430 Machining (@68.40 per MH) 98496 98496 Setups (@189.49 per setup) 19517.47 81480.7 Overeheads assigned 118013.5 179976.7 Req : Difference between two costing in overheads assigning Standard Custom Overheads assigned as per ABC 118014 179977 Less: Overheads as per PDOR Standard (47000*204.11%) 95931 Custom (99000*204.11%) 202069 Difference 22083 -22092
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