Clover Manufacturing Company makes two products. Using the traditional allocation method, the company has allocated overhead based on estimated total direct labor cost of $125,000. Clover recently implemented an activity-based costing system and had determined that overhead can be broken into three overhead pools: cutting, machine setups, and shipping. The following is a summary of company information:
Estimated Cost | Estimated Activities | |
Cutting | $ 24,000 | 500 cuts |
Machine setups | 8,000 | 200 machine hours |
Shipping | 20,000 | 40,000 shipments |
| $52,000 | |
Required:
a. | Calculate the company's overhead rate as a percentage of direct labor cost. |
b. | Calculate the company's overhead rates using the activity-based costing pools. |