Question

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?

Answer 1