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	$	39		$	66
Direct labor cost per unit		16			34
Sales price per unit		354			577
Expected production per month		610	units		370	units

    

Harbour has monthly overhead of $187,570, which is divided into the following cost pools:

Setup costs	$	77,900
Quality control		68,870
Maintenance		40,800
Total	$	187,570

        

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

	Home	Work	Total
Number of setups	44	51	95
Number of inspections	340	370	710
Number of machine hours	1,100	2,300	3,400

Answer 1

	ABC cost driver computation
		Home	Work	Total
	No. of Setups(Cost Driver for Setup cost)	44	51	95
	No. of Inspection(Cost Driver for Quality control)	340	370	710
	No. of Machine hours(Cost Driver for Maintainance)	1,100	2,300	3,400
	Setup cost	36,080	41,820	77,900
	Quality control	32,980	35,890	68,870
	Mainatainace	13,200	27,600	40,800
	Statement of Income	Home	Work
a	Production(In units)	610	370
b	Sales price per unit(in $)	354	577
c	Less:Direct Material per unit(in $)	39	66
d	Less:Direct labour per unit(in $)	16	34
e	Contribution per unit(b-c-d)	299	477
f	Total Contribution (in $) (a*e)	1,82,390	1,76,490
g	Setup cost	36,080	41,820
h	Quality control	32,980	35,890
i	Mainatainace	13,200	27,600
j	Total Fixed cost(g+h+i)	82,260	1,05,310
k	Net Income(f-j)	1,00,130	71,180