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.

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 $58,600 $107,000
Machine hours 1,480 1,130
Setup hours 110 430
Total estimated overhead costs are $301,600. Overhead cost allocated to the machining activity cost pool is $199,100, and $102,500 is allocated to the machine setup activity cost pool.
Collapse question part
(a)
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
(b)
The parts of this question must be completed in order. This part will be available when you complete the part above.
(c)
The parts of this question must be completed in order. This part will be available when you complete the part above.

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