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	$449,900	Number of setups	550
Ordering costs	369,600	Number of orders	17,600
Machine costs	796,100	Machine hours	41,900
Receiving	451,000	Receiving hours	11,000

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

	Model A	Model B
Direct materials	$603,000	$813,000
Direct labor	474,000	477,000
Units completed	15,300	7,200
Direct labor hours	5,500	2,000
Number of setups	370	180
Number of orders	5,800	11,800
Machine hours	23,500	18,400
Receiving hours	3,300	7,700

The company's normal activity is 7,500 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