Initial concept formation 20
Design 150,000
Construction oversight 100
Number of project changes
Square feet
Number of months
( a) Compute the predetermined overhead rate for each activity.
( b) Classify each of these activities as unit-level, batch-level, productlevel, or facility-level.
E4-1
Saddle Inc. has two types of handbags: standard and custom. The controller has decided to use a plant wide 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 $ 50,000 $ 100,000 Machine hours 1,000 1,000 Setup hours 100 400