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	$464,580	Number of setups	580
Ordering costs	327,600	Number of orders	18,200
Machine costs	836,000	Machine hours	41,800
Receiving	364,900	Receiving hours	8,900

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

	Model A	Model B
Direct materials	$571,000	$844,000
Direct labor	$484,000	$459,000
Units completed	15,400	8,300
Direct labor hours	5,700	1,500
Number of setups	400	180
Number of orders	5,900	12,300
Machine hours	23,800	18,000
Receiving hours	2,400	6,500

The company's normal activity is 7,200 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? Direct Labor hours or Four activity drivers