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	$402,390	Number of setups	510
Ordering costs	324,000	Number of orders	18,000
Machine costs	768,600	Machine hours	42,700
Receiving	384,000	Receiving hours	9,600

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

	Model A	Model B
Direct materials	$565,000	$786,000
Direct labor	472,000	500,000
Units completed	15,900	9,000
Direct labor hours	6,300	1,500
Number of setups	350	160
Number of orders	6,000	12,000
Machine hours	24,600	18,100
Receiving hours	2,800	6,800

The company's normal activity is 7,800 direct labor hours.

Required:

1. Determine the unit cost for each model using direct labor hours to apply overhead. Round intermediate calculations and final answers to nearest cent.

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?

Four Activity drivers