Refer to the information in P5-9. Assume the company employs three systems engineers at an annual salary of \(\$ 75,000\) each. The engineers devote \(85 \%\) of their time to Web site maintenance and \(15 \%\) to improving technical aspects of order retrieval. Eight people who pick orders consume supplies and equipment-related overhead costs of \(\$ 20,000\) each. Interviews during the activity-based costing design process indicated these employees devote \(90 \%\) of their time to picking, but occasionally help with specialty handling requirements of large orders ( \(10 \%\) of their time). Depreciation on equipment and tools for special handling activities total \(\$ 70,000\) per year. The packaging department employs four people who devote approximately \(70 \%\) of their time to standard packaging activities and \(30 \%\) to specialty handling. Each person consumes \(\$ 15,000\) annually in support-related overhead costs.

Information is presented in tabular form as follows:

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A. Using your diagram from P5-9 as a guide, determine the costs to be allocated in the first stage to each activity pool.
B. For each activity pool in your diagram, identify a reasonable cost allocation base (second-stage cost driver).
C. What factors might cost system designers consider when choosing among numerous potential cost drivers for cost-allocation purposes?

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Resource Systems engineers Number Resource Consumption Activity Allocation 85% Web site maintenance 15% order retrieval 3 $75,000 each 8 $20,000 each 90% order retrieval Order pickers Depreciation Packaging $70,000 $15,000 10% specialty handling 100% special handling 70% standard packaging 30% specialty handling