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

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

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

Setup costs $ 68,800 Quality control 58,400 Maintenance 48,000 Total $ 175,200

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

Home Work Total Number of setups 42 58 100 Number of inspections 340 390 730 Number of machine hours 1,700 1,300 3,000

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.

2. Calculate the production cost per unit for each of Harbour's products under a traditional costing system.

3. Calculate Harbour's gross margin per unit for each product under the traditional costing system.

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.

7. Calculate Harbour's gross margin per unit for each product under an ABC system

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