The Glasgow Electronics Company produces three types of circuit boards: L, M, and N. The cost accounting system used by Glasgow until 2005 applied all costs except direct materials to the products using direct labour hours as the only cost driver. In 2005 the company undertook a cost study. The study determined that there were six main factors causing costs to be incurred.

A new system was designed with a separate cost pool for each of the six factors.
The factors and the costs associated with each are as follows:

The company is now preparing a budget for 2007. The budget includes the following predictions:

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1. Direct labour hours-direct labour cost and related fringe benefits and payroll taxes. 2. Machine hours-amortization and repairs and maintenance costs. 3. Kilograms of materials-materials receiving, handling, and storage costs. 4. Number of production setups-labour used to change machinery and computer configurations for a new production batch. 5. Number of production orders-costs of production scheduling and order processing. 6. Number of orders shipped-all packaging and shipping expenses.