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 Billing Digging trenches Payroll Plant supervision Product design Purchasing materials Selling Janitorial Machine maintenance Machine setups Testing Molding Welding Packaging o o ii 2 DET & 12 60'F Clear Using the following information, determine the overhead rates and the actual cost assigned for each of the activity cost pools in a possible ABC system for Waterways. (Round answers to 2 decimal places, e.g. 12.25.) WATERWAYS CORPORATION Activity Cost Pools Expected Use of Cost Drivers per Activity Estimated Overhead $1,948,650 Cost Drivers Actual Use of Drivers Labor cost 11,810 1,511,600 11.791 30,233,000 Irrigation installation Machining (all machine use) Customer orders Shipping 30.232.000 25,960 2.360 2,329 Machine hours Number of orders none (direct) Cost per design Number of sales calls N/A N/A traced directly Design 864 9 8 Selling 364,800 22,800 22,980 WATERWAYS CORPORATION 60'F Clear - WATERWAYS CORPORATION Activity Cost Pools Activity Based Overhead Rates Actual Cost Assigned Irrigation installation S 165 S 11791 Machining (all machine use) 0.05 30233000 Customer orders 11 1 2329 Design 96 8 Selling 16 22980 e Textbook and Media How would you classify each of the following activities by level-unit level, batch level, product level, or facility level? h O RE 3 60F Clear How would you classify each of the following activities by level-unit level, batch level, product level, or facility level? Testing of products (if all items are tested) Unit Testing of products (if all items are not tested) Batch > > w Machine maintenance Facility