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

	Home		Work
Direct materials cost per unit	$ 38		$ 72
Direct labor cost per unit	24		37
Sales price per unit	359		573
Expected production per month	680	units	420	units

Harbour has monthly overhead of $198,615, which is divided into the following activity pools:

Setup costs	$ 72,540
Quality control	60,075
Maintenance	66,000
Total	$ 198,615

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

	Home	Work	Total
Number of setups	38	55	93
Number of inspections	320	355	675
Number of machine hours	1,400	1,900	3,300

Required:

Suppose Harbour uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line.

Calculate the production cost per unit for each of Harbours products under a traditional costing system.

Calculate Harbours gross margin per unit for each product under the traditional costing system.

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

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

Calculate the production cost per unit for each of Harbours products in an ABC system.

Calculate Harbours gross margin per unit for each product under an ABC system.

Compare the gross margin of each product under the traditional system and ABC.