Answer:
Deoro Company
1. Unit cost using direct labor hours to apply overhead:
Unit Cost
Model A $167.985
Model B $226.99
2. Unit cost using the four activity drivers:
Unit Cost
Model A $133.97  
Model B $287.28
3. Activity-based costing method always produces the more accurate cost assignment.
Explanation:
a) Data and Calculations:
Activity                    Expected Cost      Activity Driver    Activity Capacity 
Setting up equipment   $548,080       Number of setups          680 
Ordering costs                 313,200        Number of orders     17,400 
Machine costs                 939,400        Machine hours         42,700 
Receiving                         343,000        Receiving hours         9,800
Total overhead costs $2,142,680 
Activity Rates:
Setting up equipment   $806 per setup ($548,080/680)
Ordering costs              $18 per order ($313,200/17,400)
Machine costs              $22 per machine hour ($939,400/42,700)
Receiving                     $35 per receiving hour ($343,000/9,800)
                                     Model A            Model B
Direct materials        $600,000          $800,000
Direct labor               $480,000          $480,000
Overhead applied  $1,063,500        $1,018,200
Total costs              $2,143,500      $2,298,200
Units completed            16,000               8,000
Cost per unit                $133.97         $287.275
Direct labor hours          6,000               2,000
Number of setups             400                  200
Number of orders          6,000             12,000
Machine hours             24,000             18,000
Receiving hours             3,000               7,000
The company's normal activity is 8,000 direct labor hours.
Assignment of overhead costs:
                                         Model A                               Model B
Number of setups         $322,500 (400 * $806)    $161,200 (200 * $806)
Number of orders            108,000 (6,000 * $18)      216,000 (12,000 * $18)
Machine hours                528,000 (24,000 * $22)  396,000 (18,000 * $22)
Receiving hours               105,000 (3,000 * $35)    245,000 (7,000 * $35)
Total overhead applied $1,063,500                    $1,018,200
Overhead based on direct labor hours:
Total overhead costs = $2,143,680
Total direct labor hours = 8,000 (6,000 + 2,000)
Overhead rate per DLH = $267.96
Allocation of overhead:
                                     Model A                           Model B
Direct labor hours          6,000                            2,000
Overhead (DLH) $1,607,760 ($267.96 *6,000) $535,920 ($267.96  * 2,000)
                                     Model A            Model B
Direct materials        $600,000          $800,000
Direct labor               $480,000          $480,000
Overhead applied  $1,607,760          $535,920
Total costs             $2,687,760        $1,815,920
Units completed           16,000                8,000
Cost per unit            $167.985            $226.99