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

Setting up equipment $520,960

Ordering costs 327,600

Machine costs 926,200

Receiving hours 445,500

Activity Driver & Activity Capacity

Number of setups 640

Number of orders 18,200

Machine hours 42,100

Receiving 9,900

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

Model A & Model B

Direct materials $562,000 $850,000

Direct labor 495,000 483,000

Units completed 15,400 7,800

Direct labor hours 6,300 2,200

Number of setups 450 190

Number of orders 5,400 12,800

Machine hours 23,300 18,800

Receiving hours 3,900 6,000

The company's normal activity is 8,500 direct labor hours.

1. Determine the unit cost for each model using direct labor hours to apply overhead. Round intermediate calculations and final answers to nearest cent.

2. Determine the unit cost for each model using the four activity drivers. Round your answers to nearest cent.

3. Which method produces the more accurate cost assignment?