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

(b)

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		Cost Drivers		Estimated Overhead		Estimated Use of Cost Drivers per Activity		Use of Cost Drivers
Irrigation installation		Labor cost		$2,023,400		13,400		13,381
Machining (all machine use)		Machine hours		1,698,850		33,977,000		33,978,000
Customer orders		Number of orders		27,280		2,480		2,447
Shipping		none (direct)		N/A		N/A		traced directly
Design		Cost per design		896		8		7
Selling		Number of sales calls		377,400		22,200		22,380

WATERWAYS CORPORATION
Activity Cost Pools		Activity- Based Overhead Rates		OH Cost Assigned
Irrigation installation		$enter a dollar amount rounded to 2 decimal places		$enter a dollar amount rounded to 2 decimal places
Machining (all machine use)		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places
Customer orders		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places
Design		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places
Selling		enter a dollar amount rounded to 2 decimal places		enter a dollar amount rounded to 2 decimal places