Matson Industries is implementing an activity-based costing system One of the activity costs pools it has identified is failure testing. The graph below shows the total costs in this activity cost pool over the past 12 months (the solid line and the left vertical axis). Two potential activity drivers machine hours (the dashed line) and direct labor hours (the dotted line) are graphed for the same period using the right vertical axis. driver graph.jpg

Based on the data presented in the above graph, which potential cost driver appears to be the best choice for this activity cost pool?

Answer is which:

a.) machine hours

or

b.) direct labor hours

$350,000 25,000 $300,000 20,000 $250,000 $200,000 15,000 $150,000 10,000 $100,000 5,000 $50,000 $0 -Cost Pool S - - Machine Hours + DLH