a. Computation for the overhead rate using the traditional plantwide approach
Plantwide overhead rate = 303,000/145,000
Plantwide overhead rate= 208.97%
(43,000 + 102,000 =145,000)
b. Computation for the overhead rates using the activity-based casting approach
Machining = 196,000/2,580
Machining= 75.97 per machine hour
Machine setup = 107,000/490
Machine setup = 218.37 per setup
c. Calculation to determine the difference in allocation between the two approaches.
Overhead allocated :
Traditional costing
Standard= (43,000×208.97%)
Standard=89,857
Custom=(102,000×208.97%)
Custom=213,149
Activity based costing
Standard= (1,310×75.97)+(110×218.37)
Standard=99,520.7+24,020.7
Standard=123,541
Custom=(1,270×75.97)+(380×218.37)
Custom=96,482+82,981
Custom=179,463
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