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Managerial Project Part 4 pirect labor or machine hours may not be the manufacturing due to the complexities of many manufact based costing (ABC) which
Managerial Project Part 4 pirect labor or machine hours may not be the manufacturing due to the complexities of many manufact based costing (ABC) which uses multiple drivers (tems 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. Trip 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 Trip s may not be the appropriate cost driver for overhead in all areas of many manufacturing processes. Many companies use activity- Assembling Payroll Billing Plant supervision Digging trenches Purchasing materials Machine maintenance Selling Machine setups Testing Molding Welding Packaging TRIP CORPORATION Expected Use of Actual Use of privers Estimated Cost Drivers Cost Drivers Qverhead eActivity Labor cost $1,999,50012,900 Machining (all machine use) Machine hours 1,670,400 33,408,000 12,941 33,409,000 2,520 Irrigation installation 30,636 Customer orders Shipping Design Selling of orders none (direct) Cost per design Number of calls 2,553 N/A traced directly 10 372,300 21,900 820 22,100
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