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Thank you :) Direct labor or machine hours may not be the appropriate cost driver for overhead in all areas of manufacturing due to the

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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 thanjust 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 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 Expected Use of Cost Activity Cost Estimated Drivers per Actual Use of Pools Cost Drivers Overhead Activity Drivers Irrigation installation Labor cost $2,076,240 12,660 12,639 Machining (all machine use) Machine hours 1,743,600 34,872,000 34,873,000 Customer orders Number of orders 30,360 2,530 2,495 Shipping none (direct) N/A N/A traced directly Design Cost per design 904 8 7 Selling Number of sales calls 336,600 19,800 20,010 WATERWAYS CORPORATION Activity- Based Actual Activity Cost Overhead Cost Pools Rates Assigned Irrigation installation $ $ Machining (all machine use) Customer orders Design Selling

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