Harbour Company makes two models of electronic tablets, the Home and the Work. B
ID: 2420197 • Letter: H
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
$
43
$
70
Direct labor cost per unit
17
38
Sales price per unit
350
578
Expected production per month
610
units
410
units
Harbour has monthly overhead of $182,750, which is divided into the following cost pools:
Setup costs
$
87,740
Quality control
61,410
Maintenance
33,600
Total
$
182,750
The company has also compiled the following information about the chosen cost drivers:
Home
Work
Total
Number of setups
36
71
107
Number of inspections
320
370
690
Number of machine hours
1,400
1,400
2,800
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. (Round your intermediate calculations and final answers to 2 decimal places.)
Home
Work
Groos Profit
8.
Compare the gross margin of each product under the traditional system and ABC. (Round your answers to 2 decimal places.)
Home
Work
Gross Margin ( Traditional)
Gross Margin (ABC)
Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows:
Explanation / Answer
Part 6)
The overheads will be allocated between home and work tablets will be required in order to determine the unit cost. The overheads have been allocated as follows:
The cost per unit for each type of tablet has been calculated as follows:
___________
Part 7)
The gross margin per unit under ABC has been calculated with the the use of following table:
___________
Part 8)
The total amount of overhead allocated under traditional costing is given below:
Overhead Allocated to Home Tablet = 182,750*1,400/2,800 = $91,375 [based on Machine Hours]
Overhead Allocated to Work Tablet = 182,750*1,400/2,800 = $91,375 [based on Machine Hours]
___________
The comparision of gross margin per unit under both the methods has been calculated as follows:
__________
The comparision of total gross margin under both the methods has been calculated as follows:
Home Work Total Setup Costs 29,520 (87,740*36/107) 58,220 (87,740*71/107) 87,740 Quality Control 28,480 (61,410*320/690) 32,930 (61,410*370/690) 61,410 Maintenance 16,800 (33,600*1,400/2,800) 16,800 (33,600*1,400/2,800) 33,600 Total $74,800 $107,950 $182,750 Expected Production 610 410 Overhead Per Unit $122.62 $263.29Related Questions
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