-/1 Direct labor or machine hours may not be the appropriate cost driver for overhead in all areas of manufacturing due to the complexities of many manufacturing processes. Many companies use activity-based costing (ABC) which uses multiple drivers (items that consume resources) rather than just one driver to apply overhead to their activities. With ABC, a company can use a cost driver that has a direct cause/effect relationship in its applied overhead costs. Waterways looked into ABC as a method of costing because of the variety of items it produces and the many different activities in which it is involved. The activities listed below area sample of possible cost pools for Waterways, Assembling Payroll Billing Plant supervision Digging trenches Product design Janitorial Purchasing materials Machine maintenance Selling Machine setups Testing Molding Welding Packaging 153 Using the following information determine the owerhead rates and the actual costassigned for each of the activity cost pools in Using the following information, determine the overhead rates and the actual cost assigned for each of the activity cost a possible ABC system for Waterways. (Round answers to 2 decimal places, eg. 12.25.) WATERWAYS CORPORATION Activity Cost Pools Irrigation installation Machining (all machine use) Customer orders Shipping Design Selling Cost Drivers Labor cost Machine hours Number of orders none (direct) Cost per design Number of sales calls Estimated Overhead $1.996,500 1.598,300 29.520 N/A 736 313,500 Expected Use of Cost Drivers per Activity 13,310 31,966,000 2,460 NA Actual Use of Drivers 13,292 31.967,000 2.426 traced directly 7 21.100 8 20,900 WATERWAYS CORPORATION Activity Based Overhead Actual Cost Activity Cost WATERWAYS CORPORATION Activity Based Overhead Rates Activity Cost Pools Irrigation installation Actual Cost Assigned $ Machining (all machine use) Customer orders Design Selling e Textbook and Media Question 4 of 4 Testing of products (if all items are tested) Testing of products (if all items are not tested) Designing new products Packaging Molding Assembling Depreciation Machine maintenance Advertising Equipment setups Semedia.com Molding