XYZ Company has identified the following overhead activities, costs, and activity drivers for the coming year:
Activity Expected Cost Activity Driver Activity Capacity
Material-handling costs $45,000 Number of moves 450
Machine costs 80,000 Machine hours 20,000
Order costs 15,000 Number of orders 750
Receiving costs 30,000 Number of parts 50,000
Setup costs 50,000 Number of setups 250
Assume that each activity corresponds to a process. XYZ’s normal activity is 5,000 direct labor hours. The following two jobs were completed during March:
Job X-1 Job Y-4
Direct materials $1,500 $2,000
Direct labor ($15 per hour) $750 $750
Units completed 200 200
Number of moves 3 6
Machine hours 125 75
Number of orders 3 12
Number of parts 200 800
Number of setups 1 4
Required:
1. Determine the unit cost for each job using direct labor hours to apply overhead (tradisional method)
2. Determine the unit cost for each job using ABC method
3. Which method is more accurate?give explaination.