Question
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
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 | $467,870 | Number of setups | 590 |
Ordering costs | 342,000 | Number of orders | 18,000 |
Machine costs | 954,500 | Machine hours | 41,500 |
Receiving | 354,900 | Receiving hours | 9,100 |
Deoro produces two models of dishwashers with the following expected prime costs and activity demands:
Model A | Model B | |
Direct materials | $647,000 | $805,000 |
Direct labor | 465,000 | 472,000 |
Units completed | 16,500 | 8,200 |
Direct labor hours | 5,700 | 2,500 |
Number of setups | 350 | 240 |
Number of orders | 6,400 | 11,600 |
Machine hours | 23,600 | 17,900 |
Receiving hours | 2,800 | 6,300 |
The company's normal activity is 8,200 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?
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