Waterway 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
$50,000
$100,000
Machine hours
1,200
1,500
Setup hours
90
420
Total estimated overhead costs are $301,200. Overhead cost allocated to the machining activity cost pool is $189,000, and $112,200 is allocated to the machine setup activity cost pool.
Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, e.g. 12.25.)
Predetermined overhead rate
___________% of direct labor cost