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Cisco Systems, Inc. uses the activity-based costing (ABC) method to allocate overhead costs. The company has identified three cost pools and the following cost drivers:

  • Cisco Systems, Inc. uses the activity-based costing (ABC) method to allocate overhead costs. The company has identified three cost pools and the following cost drivers:
    • Cost Pool 1: $700 million with a cost driver of machine hours (10,000 hours)
    • Cost Pool 2: $400 million with a cost driver of direct labor hours (20,000 hours)
    • Cost Pool 3: $300 million with a cost driver of number of setups (100 setups) Calculate the overhead allocation rate for each cost pool.
       

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