Question

Keller Company makes two models of battery-operated boats, the Sandy Beach and the Rocky River. Basic production information follows: Sandy Beach Rocky River Direct materials cost per unit $ 19.80 $ 26.90 Direct labor cost per unit 14.60 17.50 Sales price per unit 83.20 106.00 Expected production per month 1,200 units 910 units Keller has monthly overhead of $11,606, which is divided into the following cost pools: Setup costs $ 2,480 Quality control 5,940 Maintenance 3,186 Total $ 11,606 The company has also compiled the following information about the chosen cost drivers: Sandy Beach Rocky River Total Number of setups 19 21 40 Number of inspections 110 385 495 Number of machine hours 1,350 1,350 2,700 Required: 1. Suppose Keller 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 Keller’s products under a traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.) 3. Calculate Keller’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 Keller wanted to implement an ABC system. (Round your answers to 2 decimal places.) 5. Assuming an ABC system, assign overhead costs to each product based on activity demands.(Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) 6. Calculate the production cost per unit for each of Keller’s products with an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.) 7. Calculate Keller’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 per unit of each product under the traditional system and ABC. (Round your answers to 2 decimal places.)

Answer 1