Wilkins 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 companyâs operations.Direct labor costs standard are $55,500, 1150 machine hours, and 100 setup hours. Direct labor costs custom are $97,200, 1270 machine hours, and 380 setup hours..:.Total estimated overhead costs are $304,000. Overhead cost allocated to the machining activity cost pool is $195300, and $108700 is allocated to the machine setup activity cost pool.Instructions(a) Compute the overhead rate using the traditional (plantwide) approach.(b) Compute the overhead rates using the activity-based costing approach.(c) Determine the difference in allocation between the two approaches.
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