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 Model B 2. Determine the unit cost for each model using the four activity drivers. Round your answers to nearest cent. Unit Cost Model A Model B 3. Which method produces the more accurate cost assignment?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
$401,000
Number of setups
500
Ordering costs
407,400
Number of orders
19,400
Machine costs
830,000
Machine hours
41,500
Receiving
481,500
Receiving hours
10,700
Deoro produces two models of dishwashers with the following expected prime costs and activity
demands:
Model A
Model B
Direct materials
$641,000
$799,000
472,000
492,000
Direct labor
17,000
7,000
Units completed
7,000
1,900
Direct labor hours
350
150
Number of setups
6,600
12,800
Number of orders
Transcribed Image Text: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 $401,000 Number of setups 500 Ordering costs 407,400 Number of orders 19,400 Machine costs 830,000 Machine hours 41,500 Receiving 481,500 Receiving hours 10,700 Deoro produces two models of dishwashers with the following expected prime costs and activity demands: Model A Model B Direct materials $641,000 $799,000 472,000 492,000 Direct labor 17,000 7,000 Units completed 7,000 1,900 Direct labor hours 350 150 Number of setups 6,600 12,800 Number of orders
Number of orders
6,600
12,800
Machine hours
23,800
17,700
Receiving hours
3,000
7,700
The company's normal activity is 8,900 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
Model B
2. Determine the unit cost for each model using the four activity drivers. Round your answers
to nearest cent.
Unit Cost
Model A
Model B
3. Which method produces the more accurate cost assignment?
Transcribed Image Text:Number of orders 6,600 12,800 Machine hours 23,800 17,700 Receiving hours 3,000 7,700 The company's normal activity is 8,900 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 Model B 2. Determine the unit cost for each model using the four activity drivers. Round your answers to nearest cent. Unit Cost Model A Model B 3. Which method produces the more accurate cost assignment?
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