Question
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
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 | $500,960 | Number of setups | 620 |
Ordering costs | 392,700 | Number of orders | 18,700 |
Machine costs | 867,300 | Machine hours | 41,300 |
Receiving | 331,200 | Receiving hours | 9,200 |
Deoro produces two models of dishwashers with the following expected prime costs and activity demands:
Model A | Model B | |
Direct materials | $556,000 | $808,000 |
Direct labor | 462,000 | 459,000 |
Units completed | 16,200 | 7,100 |
Direct labor hours | 6,300 | 2,100 |
Number of setups | 380 | 240 |
Number of orders | 6,000 | 12,700 |
Machine hours | 23,900 | 17,400 |
Receiving hours | 3,100 | 6,100 |
The company's normal activity is 8,400 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 | $fill in the blank 1 |
Model B | $fill in the blank 2 |
2. Determine the unit cost for each model using the four activity drivers. Round your answers to nearest cent.
Unit Cost | |
Model A | $fill in the blank 3 |
Model B | $fill in the blank 4 |
3. Which method produces the more accurate cost assignment?
Direct labor hoursFour activity drivers
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