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

	Home	Work
Direct materials cost per unit	$ 39		$ 63
Direct labor cost per unit	22		40
Sales price per unit	362		567
Expected production per month	660	units	330	units

Harbour has monthly overhead of $174,760, which is divided into the following activity pools:

Setup costs	$ 74,260
Quality control	54,600
Maintenance	45,900
Total	$ 174,760

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

	Home	Work	Total
Number of setups	42	52	94
Number of inspections	330	320	650
Number of machine hours	1,500	1,200	2,700

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 Harbours products under a traditional costing system.
3. Calculate Harbours gross margin per unit for each product under the traditional costing system.
4. Select the appropriate cost driver for each activity 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 Harbours products in an ABC system.
7. Calculate Harbours 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.