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?