Question

Deoro Company has identified the following overhead activities, costs, and activity drivers for the coming year:...

Deoro Company has identified the following overhead activities, costs, and activity drivers for the coming year:

Activity Expected Cost Activity Driver Activity Capacity
Setting up equipment $441,280 Number of setups 560
Ordering costs 318,600 Number of orders 17,700
Machine costs 890,400 Machine hours 42,400
Receiving 294,000 Receiving hours 8,400

Deoro produces two models of dishwashers with the following expected prime costs and activity demands:

Model A Model B
Direct materials $611,000 $832,000
Direct labor $481,000 $473,000
Units completed 15,400 8,300
Direct labor hours 6,400 1,500
Number of setups 410 150
Number of orders 5,800 11,900
Machine hours 23,500 18,900
Receiving hours 2,100 6,300

The company's normal activity is 7,900 direct labor hours.

Required:

1. Determine the unit cost for each model using direct labor hours to apply overhead. Round intermediate calculations and final answers to nearest cent.

Unit Cost
Model A $
Model B $

2. Determine the unit cost for each model using the four activity drivers. Round your answers to nearest cent.

Unit Cost
Model A $
Model B $

3. Which method produces the more accurate cost assignment?

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