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.
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Standard
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Custom
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Direct labor costs
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$51,900
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$101,000
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Machine hours
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1,470
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1,280
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Setup hours
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100
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380
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Total estimated overhead costs are $298,800. Overhead cost allocated to the machining activity cost pool is $196,700, and $102,100 is allocated to the machine setup activity cost pool.
Determine the difference in allocation between the two approaches. (Round answers to 0 decimal places, e.g. $1,225.)
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Traditional costing
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Standard
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$
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Custom
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$
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Activity-based costing
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Standard
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$
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Custom
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$
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