Miami Valley Architects Inc. provides a wide range of engineering and architectural consulting services through its three branch offices in Columbus, Cincinnati, and Dayton, Ohio. The company allocates resources and bonuses to the three branches based on the net income of the period. The results of the firm's performance for the most recent year follows ($ in thousands): Sales Columbus $ 1,500 Cincinnati $ 1,419 Dayton $ 1,067 Total $ 3,986 Less: Direct labor 382 317 317 1,016 Direct materials Overhead 281 421 185 887 710 589 589 1, 888 Net income $ 127 $ 92 $ (24) $ 195 Miami Valley accumulates overhead items in one overhead pool and allocates it to the branches based on direct labor dollars. For this year, the predetermined overhead rate was $1.859 for every direct labor dollar incurred by an office. The overhead pool includes rent, depreciation, and taxes, regardless of which office incurred the expense. Some branch managers complain that the overhead allocation method forces them to absorb a portion of the overhead incurred by the other offices. Management is concerned with the recent operating results. During a review of overhead expenses, management noticed that many overhead items were clearly not correlated to the movement in direct labor dollars as previously assumed. Management decided that applying overhead based on activity-based costing and direct tracing wherever possible should provide a more accurate picture of the profitability of each branch. An analysis of the overhead revealed that the following dollars for rent, utilities, depreciation, and taxes could be traced directly to the office that incurred the overhead ($ in thousands): Direct overhead Columbus $ 180 Cincinnati $ 270 Dayton Total $ 177 $ 627 Activity pools and their corresponding cost drivers were determined from the accounting records and staff surveys as follows: