ACC 560 MART Learn by Doing/acc560mart.com ACC 560 MART Learn by Doing/acc560mart.com | Page 18

Initial concept formation
20

Number of project changes

Design
150,000

Square feet

Construction oversight
100

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.

Direct labor costs

Standard

Custom

$50,000

$100,000

Machine hours
Setup hours

1,000
100

1,000
400