Waterways Continuing Problem (This is a WCP17 manufacturing due to the complexities of many manufacturing processes. Many companies use activity- based driver to apply overhead to their activities. causeleffect relationship in its applied overhead costs continuation of the Waterways Problem from Chapters 14 through 16.) Direct labor or machine hours may not be the appropriate cost driver for overhead in all areas of costing (ABC) which uses multiple drivers (items that consume resources) rather than just one With ABC, a company can use a cost driver that has a direct 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 are a sample of possible cost pools for Waterways Assembling Billing Digging trenches Janitorial Machine maintenance Machine setups Molding Payroll Plant supervision Product design Purchasing materials Testing Welding Instructions (a) For each of these cost pools, what would be the likely activity cost driver? (b) 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. WATERWAYS CORPORATION Expected Use of Cost Actual Use of Drivers Estimated Drivers per Activity Cost Pools Cost Drivers Overhead Activity 12,941 $1,998,432 30,636 820 350,400 12,960 Labor cost Irrigation installation Machining (all machine use) Customer orders Shipping Design Selling 1,670,400 33,408,000 2,553 33,409,000 2,520 Machine hours Number of orders none (direct) Cost per design Number of sales calls N/A traced directly 8 21,900 22,100 (c) How would you classify each of the following activities by level-unit level, batch level,product level or facility level? Testing of products Designing new products Packaging Molding Assembling Depreciation Machine maintenance Advertising Equipment setups Electricity required to run equipment Requisitioning materials Waterways Continuing Problem (This is a WCP17 manufacturing due to the complexities of many manufacturing processes. Many companies use activity- based driver to apply overhead to their activities. causeleffect relationship in its applied overhead costs continuation of the Waterways Problem from Chapters 14 through 16.) Direct labor or machine hours may not be the appropriate cost driver for overhead in all areas of costing (ABC) which uses multiple drivers (items that consume resources) rather than just one With ABC, a company can use a cost driver that has a direct 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 are a sample of possible cost pools for Waterways Assembling Billing Digging trenches Janitorial Machine maintenance Machine setups Molding Payroll Plant supervision Product design Purchasing materials Testing Welding Instructions (a) For each of these cost pools, what would be the likely activity cost driver? (b) 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. WATERWAYS CORPORATION Expected Use of Cost Actual Use of Drivers Estimated Drivers per Activity Cost Pools Cost Drivers Overhead Activity 12,941 $1,998,432 30,636 820 350,400 12,960 Labor cost Irrigation installation Machining (all machine use) Customer orders Shipping Design Selling 1,670,400 33,408,000 2,553 33,409,000 2,520 Machine hours Number of orders none (direct) Cost per design Number of sales calls N/A traced directly 8 21,900 22,100 (c) How would you classify each of the following activities by level-unit level, batch level,product level or facility level? Testing of products Designing new products Packaging Molding Assembling Depreciation Machine maintenance Advertising Equipment setups Electricity required to run equipment Requisitioning materials
