Answer:
WATERWAYS CORPORATION
a.
Activity Cost Overhead Actual Cost
Pools Activity- Rates Assigned
Based
Irrigation installation $ 154.20 $1,995,502.20
Machining (all machine use) $0.05 1,670,450.00
Customer orders $12 30,240.00
Design $102.50 717.50
Selling $16 353,600.00
b. Classification of activities by level:
Activities Levels
Testing of products (if all items are tested) Unit
Testing of products (if all items are not tested) Batch
Designing new products Product
Packaging Unit
Molding Product
Assembling Batch
Depreciation Facility
Machine maintenance Unit
Advertising Product
Equipment setups Batch
Electricity required to run equipment Facility
Requisitioning materials Unit
Explanation:
a) Data and Calculations:
WATERWAYS CORPORATION
Activity Cost Estimated Expected Actual Use
Pools Cost Drivers Overhead Use of Cost of Drivers
Drivers per
Activity
Irrigation installation Labor cost $1,998,432 12,960 12,941
Machining Machine hours 1,670,400 33,408,000 33,409,000
Customer orders No. of orders 30,636 2,553 2,520
Design Cost per design 820 8 7
Selling No. of sales calls 350,400 21,900 22,100
Overhead Rates:
Irrigation $1,998,432/12,960 = $154.20 per DLH
Machining 1,670,400/33,408,000 = $0.05 per machine hour
Customer orders 30,636/2,553 = $12 per order
Design 820/8 = $102.50 per design
Selling 350,400/21,900 = $16 per sales call
Activity Cost Overhead Actual Cost
Pools Activity- Rates Assigned
Based
Irrigation installation $ 154.20 $1,995,502.20 ($154.20*12,941)
Machining (all machine use) $0.05 1,670,450($0.05*33,409,000)
Customer orders $12 30,240 ($12*2,520)
Design $102.50 717.50($102.50*7)
Selling $16 353,600($16*22,100)
b) Levels of Activity:
Unit-level activities: At this level, the costs are concerned with direct materials, direct labor, and machine maintenance.
Product-level activities are specific to a product.
Batch‐level activities require a group (batch) of units to be produced or some processes performed together.
Facility-level activities are support activities required for the development and production of goods and services. They are organization-wide.
