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 | $497,860 | Number of setups | 620 |
Ordering costs | 366,000 | Number of orders | 18,300 |
Machine costs | 856,000 | Machine hours | 42,800 |
Receiving | 432,600 | Receiving hours | 10,300 |
Deoro produces two models of dishwashers with the following expected prime costs and activity demands:
Model A | Model B | |
Direct materials | $605,000 | $773,000 |
Direct labor | $482,000 | $477,000 |
Units completed | 15,300 | 7,600 |
Direct labor hours | 6,000 | 1,700 |
Number of setups | 420 | 200 |
Number of orders | 5,700 | 12,600 |
Machine hours | 24,700 | 18,100 |
Receiving hours | 2,600 | 7,700 |
The company's normal activity is 7,700 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 | $ |
Overhead rate = Total overheads/Total labor hours | 279.54 | per hour | ||
Model A | Model B | |||
Direct Material | 605,000 | 773,000 | ||
Direct Labor | 482,000 | 477,000 | ||
Overheads | 1,677,240 | 475,218 | ||
Total cost | 2,764,240 | 1,725,218 | ||
Number of units | 15,300 | 7,600 | ||
Unit cost | 180.67 | 227.00 | ||
2. | ||||
Activity | Expected Cost | Activity Driver | Activity Capacity | Activity Rate |
Setting up equipment | 497860 | Number of setups | 620 | 803 |
Ordering costs | 366,000 | Number of orders | 18,300 | 20 |
Machine costs | 856,000 | Machine hours | 42,800 | 20 |
Receiving | 432,600 | Receiving hours | 10,300 | 42 |
Total overheads | 2,152,460 | |||
Model A | Model B | |||
Direct Material | 605,000 | 773,000 | ||
Direct Labor | 482,000 | 477,000 | ||
Overheads | ||||
Setting up equipment | 337,260 | 160,600 | ||
Ordering costs | 114,000 | 252,000 | ||
Machine costs | 494,000 | 362,000 | ||
Receiving | 109,200 | 323,400 | ||
Total cost | 2,141,460 | 2,348,000 | ||
Number of units | 15,300 | 7,600 | ||
Unit cost | 139.96 | 308.95 |
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