Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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.)
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 Billing Digging trenches Janitorial Payroll Plant supervision Product design Purchasing materials Selling Testing Welding Machine maintenance Machine setups Molding Packaging WATERWAYS CORPORATION Estimated Overhead Actual Use of Drivers Cost Drivers Activity Cost Pools Irrigation installation Machining (all machine use) Customer orders Labor cost Expected Use of Cost Drivers per Activity 13,400 33,977,000 2,480 N/A $2,023,400 1,698,850 27,280 N/A Machine hours 13,381 33,978,000 2,447 traced directly Number of orders Shipping Design Selling none (direct) Cost per design Number of sales calls 896 8 7 377,400 22,200 22,380 WATERWAYS CORPORATION Activity- Based Activity Cost Overhead Pools Rates Actual Cost Assigned Irrigation installation $1 Machining (all machine use) Customer orders CODI TOTTE Design Selling
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started