Activity Based Cost Accounting

This customer manufactures aftermarket automotive products. They were going through an activity based accounting exercise to assign overhead costs to their various departments. In particular, one department uses considerably more compressed air than all the other departments and should bear most of the company's compressed air costs. What they needed to establish is how much compressed air each department uses and allocate compressed air costs accordingingly. Using Model 9095 Digital Flowmeters they were able to measure air consumption for the various departments. From that data they were able to calculate a burden rate for each department according to their use.