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 | $441,280 | Number of setups | 560 |
Ordering costs | 318,600 | Number of orders | 17,700 |
Machine costs | 890,400 | Machine hours | 42,400 |
Receiving | 294,000 | Receiving hours | 8,400 |
Deoro produces two models of dishwashers with the following expected prime costs and activity demands:
Model A | Model B | |
Direct materials | $611,000 | $832,000 |
Direct labor | $481,000 | $473,000 |
Units completed | 15,400 | 8,300 |
Direct labor hours | 6,400 | 1,500 |
Number of setups | 410 | 150 |
Number of orders | 5,800 | 11,900 |
Machine hours | 23,500 | 18,900 |
Receiving hours | 2,100 | 6,300 |
The company's normal activity is 7,900 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?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started