Question

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

   

	Home			Work
Direct materials cost per unit	$	35		$	72
Direct labor cost per unit		22			36
Sales price per unit		356			579
Expected production per month		790	units		440	units

    

Harbour has monthly overhead of $181,540, which is divided into the following cost pools:

       

Setup costs	$	84,700
Quality control		51,840
Maintenance		45,000
Total	$	181,540
The company has also compiled the following information about the chosen cost drivers:          Home   Work   Total   Number of setups 38 72 110   Number of inspections 320 320 640   Number of machine hours 1,100   1,900 3,000              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.) Overhead Assigned Home Model: Work Model: Total Overhead Cost $0

2.	Calculate the production cost per unit for each of Harbour’s products under a traditional costing system.

	Home Work Unit Cost

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.)
	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.) Home Work Unit Cost     4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Harbour wanted to implement an ABC system. Home Work Gross Margin 5. Assuming an ABC system, assign overhead costs to each product based on activity demands. Overhead Assigned To Home Overhead Assigned To Work Setup Costs Quality Control Maintenance Total Overhead Cost $0 $0 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.) Home Work Unit Cost
	7. Calculate Harbour’s gross margin per unit for each product under an ABC system. Home Work Gross Margin 8. Compare the gross margin of each product under the traditional system and ABC. Home Work Gross Margin (Traditional) Gross Margin (ABC)

Answer 1