Question 1 of 8
Lily, Inc. produces two types of gas grills: a family model and a deluxe model. Lily's controller has decided to use a plantwide overhead
rate based on direct labor costs. The president of the company recently 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:
Family Model Deluxe Model
Direct labor costs
$75,900
$151,800
Machine hours
2,000
2,000
Setup hours
200
800
Total estimated overhead costs are $455,400. Overhead cost allocated to the machining activity cost pool is $273,240 and $182,160
is allocated to the machine setup activity cost pool.
(a)
Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, eg. 15.25)
Overhead rate