Direct labor or machine hours may not be the appropriate cost driver for overhead in all...

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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 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 Payroll Plant supervision Digging trenches Product design Janitorial Purchasing materials Machine maintenance Selling Machine setups Molding Testing Welding Packaging (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. (Round answers to 2 decimal places, e.g. 12.25.) WATERWAYS CORPORATION Activity Cost Pools Cost Drivers Estimated Overhead Estimated Use of Cost Drivers per Activity Use of Cost Drivers Irrigation installation Labor cost $1,998,432 12,960 12,941 Machining (all machine use) Machine hours 1,670,400 33,408,000 33,409,000 Customer orders Number of orders 30,636 2,553 2,520 Shipping none (direct) N/A N/A traced directly Design Cost per design 820 8 7 Selling Number of sales calls 350,400 21,900 22,100 Activity Cost Pools Irrigation installation Machining (all machine use) Customer orders Design Selling eTextbook and Media Save for Later eTextbook and Media Save for Later eTextbook and Media Save for Later WATERWAYS CORPORATION Activity- Based Overhead Rates A OH Cost Assigned Attempts: 0 of 3 used Submit Answer Attempts: 0 of 3 used Submit Answer G Translate... Find and Edit Attempts: 0 of 3 used Save and Sha E More Tools (c) Help Settings The parts of this question must be completed in order. This part will be available when you complete the part above. 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 Payroll Plant supervision Digging trenches Product design Janitorial Purchasing materials Machine maintenance Selling Machine setups Molding Testing Welding Packaging (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. (Round answers to 2 decimal places, e.g. 12.25.) WATERWAYS CORPORATION Activity Cost Pools Cost Drivers Estimated Overhead Estimated Use of Cost Drivers per Activity Use of Cost Drivers Irrigation installation Labor cost $1,998,432 12,960 12,941 Machining (all machine use) Machine hours 1,670,400 33,408,000 33,409,000 Customer orders Number of orders 30,636 2,553 2,520 Shipping none (direct) N/A N/A traced directly Design Cost per design 820 8 7 Selling Number of sales calls 350,400 21,900 22,100 Activity Cost Pools Irrigation installation Machining (all machine use) Customer orders Design Selling eTextbook and Media Save for Later eTextbook and Media Save for Later eTextbook and Media Save for Later WATERWAYS CORPORATION Activity- Based Overhead Rates A OH Cost Assigned Attempts: 0 of 3 used Submit Answer Attempts: 0 of 3 used Submit Answer G Translate... Find and Edit Attempts: 0 of 3 used Save and Sha E More Tools (c) Help Settings The parts of this question must be completed in order. This part will be available when you complete the part above.

Answer rating: 100% (QA)

A B AB C CAB ACTIVITY COST DRIVER ESTIMATED COST ESTIMATED U... View the full answer