part3

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		$47,500		$119,000
Machine hours		1,490		1,330
Setup hours		110		380

Total estimated overhead costs are $299,400. Overhead cost allocated to the machining activity cost pool is $196,200, and $103,200 is allocated to the machine setup activity cost pool.

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

Predetermined overhead rate

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% of direct labor cost