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arbour Company makes two models of electronic tablets, the Home and the Work. Basic production information...

arbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows:

Home Work
Direct materials cost per unit $ 45 $ 70
Direct labor cost per unit 16 34
Sales price per unit 369 572
Expected production per month 690 units 400 units

Harbour has monthly overhead of $189,130, which is divided into the following cost pools:

Setup costs $ 76,800
Quality control 54,530
Maintenance 57,800
Total $ 189,130

The company has also compiled the following information about the chosen cost drivers:

Home Work Total
Number of setups 41 55 96
Number of inspections 330 335 665
Number of machine hours 1,200 2,200 3,400

Required:
1. Suppose Harbour uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.)


2. Calculate the production cost per unit for each of Harbour’s products under a traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.)

3. Calculate Harbour’s gross margin per unit for each product under the traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.)

4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Harbour wanted to implement an ABC system.


5. Assuming an ABC system, assign overhead costs to each product based on activity demands.


6. Calculate the production cost per unit for each of Harbour’s products in an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.)

7. Calculate Harbour’s gross margin per unit for each product under an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.)

8. Compare the gross margin of each product under the traditional system and ABC. (Round your answers to 2 decimal places.)

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