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Exercise 17-1
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 company’s operations.

  
Standard
 
Custom
Direct labor costs $42,700 $106,000
Machine hours 1,290 1,180
Setup hours 100 380

Total estimated overhead costs are $307,600. Overhead cost allocated to the machining activity cost pool is $196,000, and $111,600 is allocated to the machine setup activity cost pool.
 
(a)
Compute the overhead rate using the traditional (plantwide) approach. (Round answers to 2 decimal places, e.g. 12.25%.)

Predetermined overhead rate 
[removed]
 % of direct labor cost
 

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