Company has identified the following overhead costs and activity drivers for next year:

Overhead item Expected Cost Activity Driver Expected quantity

Setup costs $150,000 Number of setups 1,200

Ordering costs 40,000 Number of orders 10,000

Maintenance 200,000 Machine hours 16,000

Power 20,000 Kilowatt hours 100,000

The following are two of the jobs completed during the year:

Job XX Job YY

Direct materials $2,250 $2,500

Direct labor 3,000 1,875

Units completed 375 300

Direct labor hours 90 110

Number of setups 6 8

Number of orders 8 15

Machine hours 180 150

Kilowatt hours 90 120

The companys normal activity is 20,000 direct labor hours.

Required:

a. Determine the unit cost for each job using direct labor hours to apply overhead. (Round amounts to 2 decimal places).

b. Determine the unit cost for each job using the four activity drivers. (Round amounts to 2 decimal places).

c. Which method produces the more accurate cost assignment? Why?