Question

Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows: Home $ 45 Work $ 70 18 Direct materials cost per unit Direct labor cost per unit Sales price per unit Expected production per month 363 566 700 units 440 units points Harbour has monthly overhead of $184,040, which is divided into the following cost pools: eBook Setup costs Quality control Maintenance Total $ 79,790 59,450 44,800 $184,040 Print References The company has also compiled the following information about the chosen cost drivers: Number of setups Number of inspections Number of machine hours Home Work 4061 340 385 1,300 1,900 Total 101 725 3,200 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.) Overhead Assigned Home Model: Work Model: Total Overhead Cost

Answer 1

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Harbor Company
Workings for Answer 1	Total	Note
Calculation of Predetermined OH Rate
Total Machine Hours	3,200.00	A
Total overhead	184,040.00	B
Predetermined OH Rate	57.5125	C=B/A

Answer 1
Allocated OH as per Predetermined OH Rate	Home	Work	Total	Note
Total Machine Hours	1,300.00	1,900.00		D
Predetermined OH Rate	57.51	57.51		See C
Allocated OH	74,766.25	109,273.75	184,040.00	E=D*C

Workings for Answer 2
Allocated OH per unit	Home	Work	Note
Allocated OH	74,766.25	109,273.75	See E
Units produced	700.00	440.00	F
Allocated OH per unit	106.81	248.35	G=E/F
Answer 2
Unit cost	Home	Work	Note
Direct Materials	45.00	70.00
Direct Labor	18.00	32.00
Allocated OH per unit	106.81	248.35	See G
Unit cost	169.81	350.35	H
Answer 3	Home	Work	Note
Sell price	363.00	566.00
Unit cost	169.81	350.35	See H
Gross margin	193.19	215.65	I

Answer 4		J	K	L=J/K
Calculation of ABC rates for overhead			Activity used
Activity cost pool	Cost Driver	Cost	Total	ABC rates
Setup costs	Number of setups	79,790.00	101.00	790.00
Quality Control	Number of inspections	59,450.00	725.00	82.00
Maintenance	Number of machine hours	44,800.00	3,200.00	14.00
Total Cost assigned		184,040.00

Answer 5		See L	M	N=L*M	O	P=L*O
Allocation table			Home		Work
Activity cost pool	Activity Measure	ABC Rates	Activity used	Cost assigned	Activity used	Cost assigned
Setup costs	Number of setups	790.00	40.00	31,600.00	61.00	48,190.00
Quality Control	Number of inspections	82.00	340.00	27,880.00	385.00	31,570.00
Maintenance	Number of machine hours	14.00	1,300.00	18,200.00	1,900.00	26,600.00
Total Cost assigned				77,680.00		106,360.00

Answer 6
Unit cost	Home	Work	Note
Direct Materials	45.00	70.00
Direct Labor	18.00	32.00
Allocated OH per unit	110.97	241.73	See Q
Unit cost	173.97	343.73	R
Answer 7	Home	Work	Note
Sell price	363.00	566.00
Unit cost	173.97	343.73	See R
Gross margin	189.03	222.27	S
Answer 8	Home	Work	Note
Gross margin- Traditional	193.19	215.65	See I
Gross margin- ABC	189.03	222.27	See S
Difference	4.16	(6.62)	T=I-S