During the second year of operations, RetroSound Company continues to produce two types of units: deluxe and regular.

Product- Costing Data
Activity Usage Measures	Deluxe	Regular	Total
Units produced per year	5,000	50,000	55,000
Prime costs	$39,000	$369,000	$408,000
Direct labor hours	5,000	45,000	50,000
Machine hours	10,000	90,000	100,000
Production runs	10	5	15
Number of moves	120	60	180
Activity Cost Data (Overhead Activities)
Activity	Activity driver		Activity cost
Setups	Production runs		$60,000
Material handling	Number of moves		30,000
Power	Machine hours		50,000
Testing	Direct labor hours		40,000
Total			$180,000

A. Determine the unit cost for each model using direct labor hours to apply overhead. (Calculate a POHR first)

	Deluxe	Regular
Prime Costs
Overhead
Total cost
Units
Unit cost

B. Determine the unit cost for each model using the four activity drivers.

Setups
Material Handling
Power
Testing

	Deluxe	Regular
Prime costs
Overhead:
Setups
Material Handling
Power
Testing
Total costs
Units
Unit cost

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