Question No.7 Lyon Corporation has identified the following overhead costs and activity drivers for next year: Overhead Items Expected Costs Activity Drivers Expected Qty. Set-up

Question No.7 Lyon Corporation has identified the following overhead costs and activity drivers for next year: Overhead Items Expected Costs Activity Drivers Expected Qty. Set-up costs Ordering costs Maintenance Power Rs.150,000 40,000 200,000 20,000 Number of set-ups Number of orders Machine hours Kilowatt hours 1,000 10,000 16,000 100,000 The following are two of the jobs completed during the year: Job XX                               Job YY Direct materials                       Rs.2,250                               Rs.2,500 Direct labor                             Rs.3,000                                Rs.1875 Units complete                          375                                       300 Direct labor hours                     90                                       110 Number of set-ups                     6                                           8 Number of orders                     8                                        15 Machine hours                         180                                      150 Kilowatt hours                          90                                      120 The company’s normal activity is 20,000 direct labor hours. Required: Determine the unit cost for each job using direct labor hours to apply overhead. Determine the unit cost for each job using the four activity drivers. (Round amounts to 2 decimals). Which method produces the more accurate cost assignment? Why?

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