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 are a sample of possible cost pools for Waterways.

$\backslash$table$[[$Assembling$,$Payroll$],[$Billing$,$Plant supervision$],[$Digging trenches,Product design$],[$Janitorial$,$Purchasing materials$],[$Machine maintenance,Selling$],[$Machine setups,Testing$],[$Molding$,$Welding$]]$

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$>>>>$HELP WITH THESE THREE QUESTIONS:

$>$For each of the above cost pools, what

would be the likely activity cost driver?

$>$The results of ABC can provide a more accurate picture of costs. Discuss the value of Waterways using this system to determine overhead costs.

$>$ How might using ABC affect decision making at Waterways?