Harbour Company makes two models of electronic tablets, the Home and the Work. B

Question

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

   

    

Harbour has monthly overhead of $175,200, which is divided into the following cost pools:

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

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.)

Home Work Direct materials cost per unit $ 30 $ 48 Direct labor cost per unit 20 30 Sales price per unit 300 500 Expected production per month 700 units 400 units

Explanation / Answer

We are supposed to solve 4 subparts when multiple posted, so solvinf 1 to 4
1)Predetermined overhead rate=overhead cost/total machine hours
=175200/3000
=58.40
Home product=1700*58.4=99280
Work product=1300*58.4=75920
2)Product cost :
Home=30+20+(99280/700)=191.83
Work=48+30+(75920/400)=267.80
3)Gross margin for home=sales-cost
=300-191.83=108.17
Work=500-267.80=232.20
4)Activity rate For setups cost driver is no of setups= total cost/ no of setup
=68800/100=68.8
Quality control the driver is inspections=58400/730=80
Maintennace the driver is machine hours=48000/3000=16

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