Determine the unit cost for each model

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Reference no: EM133125100

Question - Multiple Versus Single Overhead Rates, Activity Drivers - 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

$496,000

Number of setups

620

Ordering costs

332,000

Number of orders

16,600

Machine costs

910,800

Machine hours

41,400

Receiving

395,900

Receiving hours

10,700

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


Model A

Model B

Direct materials

$606,000

$789,000

Direct labor

478,000

480,000

Units completed

15,500

8,500

Direct labor hours

6,400

2,200

Number of setups

430

190

Number of orders

5,200

11,400

Machine hours

23,900

17,500

Receiving hours

3,400

7,300

The company's normal activity is 8,600 direct labor hours.

Required -

1. Determine the unit cost for each model using direct labor hours to apply overhead.

2. Determine the unit cost for each model using the four activity drivers.

3. Which method produces the more accurate cost assignment?

Reference no: EM133125100

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