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

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

The company's normal activity is 4,000 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?Why?

Transcribed Image Text:

Activity Expected Cost Activity Driver Setting up equipment Ordering costs Machine costs Receiving S120,000 90,000 210,000 100,000 Number of sctups Number of orders Machine hours Receiving hours Activity Capacity 300 9,000 21,000 5,000 Model A Model B Direct material Direct labor Units completed Direct labor hours Number of sctupS Number of orders Machine hours Receiving hours $150,000 $120,000 8,000 3,000 200 3,000 12,000 1,500 $200,000 $120,000 4,000 1,000 100 6,000 9,000 3,500