Ernest, SA., has identified the following overhead costs and cost drivers for next year:
The following are two of the jobs completed during the year:
The company's normal activity is 32,000 direct labour hours. (Round amounts to two decimal places.)
Required:

a.
Determine the unit cost for each job using direct labour hours to apply overhead.
b.
Determine the unit cost for each job using the four cost drivers.
c.
Which method produces the more accurate cost assignment? Why?

Question

Ernest, SA., has identified the following overhead costs and cost drivers for next year:
The following are two of the jobs completed during the year:
  The company's normal activity is 32,000 direct labour hours. (Round amounts to two decimal places.)
Required:
  
a.
Determine the unit cost for each job using direct labour hours to apply overhead.
b.
Determine the unit cost for each job using the four cost drivers.
c.
Which method produces the more accurate cost assignment? Why?

Quizplus · Accepted Answer

The Answer of Ernest, SA., has identified the following overhead costs and cost drivers for next year:
The following are two of the jobs completed during the year:
  The company's normal activity is 32,000 direct labour hours. (Round amounts to two decimal places.)
Required:
  
a.
Determine the unit cost for each job using direct labour hours to apply overhead.
b.
Determine the unit cost for each job using the four cost drivers.
c.
Which method produces the more accurate cost assignment? Why?