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	$	44		$	66
Direct labor cost per unit		18			37
Sales price per unit		361			580
Expected production per month		650	units		490	units

Harbour has monthly overhead of $172,590, which is divided into the following cost pools:

Setup costs	$	74,260
Quality control		59,130
Maintenance		39,200
Total	$	172,590

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

	Home	Work	Total
Number of setups	44	50	94
Number of inspections	330	400	730
Number of machine hours	1,200	1,600	2,800

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.)

home model: ____

Work model: ____

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.)

Unit cost: home: ____, work: ____

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.)

Gross Margin: home: ____, work: ____

4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Harbour wanted to implement an ABC system.

setup cost: ____

Quality Control: ____

Maintenance: ____

5. Assuming an ABC system, assign overhead costs to each product based on activity demands.

setup costs: overhead assigned to home: ____, overhead assigned to work: ____

Quality control: overhead assigned to home: ____, overhead assigned to work: ____

Maintenance: overhead assigned to home: ____, overhead assigned to work: ____

Answer 1

Total monthly overheads = $172590 Total, machine honou - 2800 hours Charbour company as whole) u 73967 overheads assigned to each product line based on machine hours; - Chome = 1200hours, work a 1600 house). nr 1200 hours & Home = $1725908 2800 hours - 98623 1600 houry 1000 house Я воо fot, - Work = $172590 x

a) production particulars cost pee unit (traditional costing System) home I wool $ 66 suu Direct material Direct labour $ 37 $ 103 prime cost per unit- (a) tot $ 62 (6) units peoduced 490 unit 650 units Total $50470 prime cost (axb) $40300 $73967 $98623 (t overheads assigned calready calculated cowich ( in part:1). Total $149093 $114267 cost (c) ho SHP 29P Deoduced (d) 1 H 49o unik 650 units soud cost per unit (c/d) vor 175.79 304.27 DUGPS

under traditional pear unik 3) gross margin costing. home work home particulary Selling price per unit $36) $580 riven) & 175.79 $304-27 (-) Cost per unit (calculated in part 2) $ 275,73 $ 185,2) & Gross margin per unito 4) appropriate cost drivers for each cost pool 4 activity rates cost poo) cost dairen activity. I activity rete Set up cost 44260 Number of setups 94 setups (74260 $790 194 Quality cost 59130 inspections 730 inspecdiory 59130 59130 = $81 t on maintenana 39200 machine how, 2000 machine (39200 – $14. how 3200 = $14 G30 hown 2800

5) If ABC costing is over heads allocated implemented, then in below mannes home particulars work 39500 (So setups * $ 790) 34760 set up cost. (a) (uu setups $790) 32400 26730 Quality control (6) 1) (40o inspections & $81) (330 inspections $ 22400 $14). (6800 (1200 hours x $14) (1600 hours x maintenan a 78290 94300 Total overheads anizned