Wilkins Inc. has two types of handbags:

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		$52,400		$116,000
Machine hours		1,410		1,210
Setup hours		98		380

Total estimated overhead costs are $301,800. Overhead cost allocated to the machining activity cost pool is $195,400, and $106,400 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

% of direct labor cost