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	$480,000		Number of setups	600
Ordering costs	360,000		Number of orders	18,000
Machine costs	840,000		Machine hours	42,000
Receiving	400,000		Receiving hours	10,000

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

	Model A		Model B
Direct materials	$600,000		$800,000
Direct labor	$480,000		$480,000
Units completed	16,000		8,000
Direct labor hours	6,000		2,000
Number of setups	400		200
Number of orders	6,000		12,000
Machine hours	24,000		18,000
Receiving hours	3,000		7,000

The company's normal activity is 8,000 direct labor hours.

Required:

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

	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?