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

	Home	Work
Direct materials cost per unit	$ 36		$ 64
Direct labor cost per unit	24		38
Sales price per unit	361		574
Expected production per month	720	units	410	units

Harbour has monthly overhead of $191,750, which is divided into the following activity pools:

Setup costs	$ 92,650
Quality control	53,600
Maintenance	45,500
Total	$ 191,750

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

	Home	Work	Total
Number of setups	45	64	109
Number of inspections	330	340	670
Number of machine hours	1,200	2,300	3,500

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.