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 | $520,650 | Number of setups | 650 |
Ordering costs | 333,000 | Number of orders | 18,500 |
Machine costs | 708,900 | Machine hours | 41,700 |
Receiving | 401,700 | Receiving hours | 10,300 |
Deoro produces two models of dishwashers with the following expected prime costs and activity demands:
Model A | Model B | |
Direct materials | $573,000 | $840,000 |
Direct labor | 485,000 | 451,000 |
Units completed | 15,100 | 8,400 |
Direct labor hours | 5,400 | 2,000 |
Number of setups | 430 | 220 |
Number of orders | 6,100 | 12,400 |
Machine hours | 24,000 | 17,700 |
Receiving hours | 3,100 | 7,200 |
The company's normal activity is 7,400 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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