Maroone, Inc The Following Are the Two Product Models Completed During the Drivers

question 35

Essay

Maroone, Inc., has identified the following overhead costs and activity drivers for next year:
$$\begin{array} { l c l c } \text { Overhead Item } & \text { Expected Cost } & \text { Activity Driver } & \text { Expected Qty. } \\\text { Setup costs } & \$ 150,000 & \text { Number of setups } & 1,200 \\\text { Ordering costs } & 40,000 & \text { Number of orders } & 10,000 \\\text { Maintenance } & 200,000 & \text { Machine hours } & 16,000 \\\text { Power } & 20,000 & \text { Kilowatt hours } & 100,000\end{array}$$
The following are the two product models completed during the year:
$$\begin{array} { l r r } & \text { Model SS } & \text { Model TT } \\\text { Direct materials } & \$ 2,250 & \$ 2,500 \\\text { Direct labor } & 3,000 & 1,875 \\\text { Units completed } & 375 & 300 \\\text { Direct labor hours } & 90 & 110 \\\text { Number of setups } & 6 & 8 \\\text { Number of orders } & 8 & 15 \\\text { Machine hours } & 180 & 150 \\\text { Kilowatt hours } & 90 & 120\end{array}$$
The company's normal activity is 20,000 direct labor hours.
Required:
a.Determine the unit cost for each job using direct labor hours to apply overhead.
b.Determine the unit cost for each job using the four activity drivers. (Round amounts to 2 decimal places.)
c.Which method produces the more accurate cost assignment? Why?

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