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

Plata 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 Activity Capacity Setting up equipment $120,000 Number of setups 300 Ordering costs Machine costs Receiving 90,000 Number of orders 9,000 210,000 Machine hours 21,000 100,000 Receiving hours 5,000