Multiple Versus Single Overhead Rates, Activity Drivers

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	$522,240	Number of setups	640
Ordering costs	329,400	Number of orders	18,300
Machine costs	714,000	Machine hours	42,000
Receiving	373,700	Receiving hours	10,100

Deoro produces two models of dishwashers with the following expected prime costs and activity demands:

	Model A	Model B
Direct materials	$630,000	$814,000
Direct labor	$499,000	$467,000
Units completed	15,200	7,700
Direct labor hours	5,300	1,600
Number of setups	450	190
Number of orders	6,300	12,000
Machine hours	24,100	17,900
Receiving hours	3,400	6,700

The company's normal activity is 6,900 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	$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