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Question: saddle inc has two types of handbags standard and custom...

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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 $ 51,000 $ 116,000 Machine hours 1,410 1,330 Setup hours 96 400 Total estimated overhead costs are $ 304,000. Overhead cost allocated to the machining activity cost pool is $ 195,000, and $ 109,000 is allocated to the machine setup activity cost pool.

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