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.
Evian 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
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