Ramos 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 $120,000 Number of setups 300

Ordering cost 90,000 Number of orders 9,000

Machine costs 210,000 Machine hours 21,000

Receiving 100,000 Receiving hours 5,000

Ramos produces two models of dishwashers with the following expected prime costs and activity

demands:

Model A Model B

Direct materials $150,000 $200,000

Direct labor $120,000 $120,000

Units completed 8,000 4,000

Direct labor hours 3,000 1,000

Number of setups 200 100

Number of orders 3,000 6,000

Machine hours 12,000 9,000

Receiving hours 1,500 3,500

The company’s normal activity is 4,000 direct labor hours.

Required:

a) Determine the unit cost for each model using direct labor hours to apply overhead.

b) Determine the unit cost for each model using the four activity drivers.

c) Which method produces the more accurate cost assignment? Why?​