Multiple Versus Single Overhead Rates, Activity Drivers

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

ActivityExpected CostActivity DriverActivity CapacitySetting 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 AModel BDirect materials$$600,000$$$800,000$Direct labor$480,000480,000$Units completed$16,0008,000$Direct labor hours$6,0002,000$Number of setups$400200$Number of orders$6,00012,000$Machine hours$24,00018,000$Receiving hours$3,0007,000$ Multiple Versus Single Overhead Rates, Activity Drivers

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

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

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.

$2.$ Determine the unit cost for each model using the four activity drivers. Round your answers to nearest cent.

$3.$ Which method produces the more accurate cost assignment?