Waterways Continuing Problem. Direct labor or machine hours may not be the appropriate cost driver for overhead
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Waterways Continuing Problem. 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 activitybased 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.
For each of these cost pools, what would be the likely activity driver?
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