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

	Home			Work
Direct materials cost per unit	$	37		$	68
Direct labor cost per unit		18			38
Sales price per unit		364			565
Expected production per month		710	units		430	units

Harbour has monthly overhead of $179,120, which is divided into the following cost pools:

Setup costs	$	83,160
Quality control		56,760
Maintenance		39,200
Total	$	179,120

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

	Home	Work	Total
Number of setups	40	68	108
Number of inspections	340	305	645
Number of machine hours	1,100	1,700	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 and 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.

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