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 $ Number of setups
Ordering costs Number of orders
Machine costs Machine hours
Receiving Receiving hours
Deoro produces two models of dishwashers with the following expected prime costs and activity demands:
Model A Model B
Direct materials $ $
Direct labor
Units completed
Direct labor hours
Number of setups
Number of orders
Machine hours
Receiving hours
The company's normal activity is direct labor hours.Required:
Determine the unit cost for each model using direct labor hours to apply overhead. Round intermediate calculations and final answers to nearest cent.
Determine the unit cost for each model using the four activity drivers. Round your answers to nearest cent.
Which method produces the more accurate cost assignment?
