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 Activity Cost Pools Cost Drivers Irrigation installation Labor cost Machining (all machine use) Machine hours Customer orders Number of orders Shipping none (direct) Design Cost per design Number of sales calls Expected Use of Cost Estimated Drivers per Actual Use of Overhead Activity Drivers $2,076,240 12,660 12,639 1,743,600 34,872,000 34,873,000 30,360 2,530 2,495 NA N/A traced directly 904 8 7 336,600 19,800 20,010 Selling WATERWAYS CORPORATION Activity Based Activity Cost Overhead Pools Rates Irrigation installation Machining (all machine use) Actual Cost Assigned $ Customer orders Design Selling How would you classify each of the following activities by level-unit level, batch level, product level, or facility level? . Batch Testing of products (if all items are tested) Testing of products (if all items are not tested) Unit Designing new products Facility Packaging Unit Molding Unit Assembling Facility Depreciation Batch Machine maintenance Facility Advertising Batch Equipment setups Batch Electricity required to run equipment Facility Requisitioning materials Product