Answer:
Saddle Inc.
1. Overhead rate using the traditional (plantwide) approach is:
= $1.84 
2. The overhead rates using activity-based costing approach are:
Machining = $72.49
Machine setup = $211.69
3. The difference in allocation between the two approaches:
Differences:
ABC approach        $121,808   $178,188   $299,996
Using plantwide     $110,400  $189,520  $299,920
Differences              $11,408    -$11,332             $76
Explanation:
a) Data and Calculations:
Total estimated overhead costs = $300,000
Machining activity = $195,000
Machine setup activity = $105,000
                              Standard   Custom     Total
Direct labor costs $60,000 $103,000  $163,000
Machine hours           1,400        1,290       2,690
Setup hours                    96          400          496
Overhead rate based on direct labor costs = $1.84 ($300,000/163,000)
Overhead rates using activity-based costing approach:
Machining = $72.49 ($195,000/2,690)
Machine setup = $211.69 ($105,000/496)
Allocation of overhead costs:
                                  Standard   Custom         Total
Using plantwide       $110,400  $189,520  $299,920
Using ABC:
Machining                $101,486    $93,512    $194,998
Machine setup           20,322      84,676      104,998
Total costs               $121,808   $178,188   $299,996
Differences:
ABC approach        $121,808   $178,188   $299,996
Using plantwide     $110,400  $189,520  $299,920
Differences               $11,408    -$11,332            $76