Direct labor or machine hours may not be the appropciate cost driver for overhead in...
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Accounting
Direct labor or machine hours may not be the appropciate 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. Using the followine information determine the overhead rates and the actual cost assigned for each of the activity cost pools in a
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