Keller Company makes two models of battery-operated boats, the Sandy Beach and the Rocky River. Basic production information follows: Sandy Beach Rocky River Direct materials cost per unit $ 19.10 $ 27.30 Direct labor cost per unit 14.20 18.30 Sales price per unit 83.20 106.00 Expected production per month 1,210 units 960 units Keller has monthly overhead of $10,161, which is divided into the following activity pools: Setup costs $ 1,740 Quality control 5,535 Maintenance 2,886 Total $ 10,161 The company also has compiled the following information about the chosen cost drivers: Sandy Beach Rocky River Total Number of setups 12 18 30 Number of inspections 170 280 450 Number of machine hours 1,300 1,300 2,600

Required:

1. Suppose Keller 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 Kellers products under a traditional costing system.
3. Calculate Kellers 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 Keller 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 Kellers products with an ABC system.
7. Calculate Kellers gross margin per unit for each product under an ABC system.
8. Compare the gross margi of each product under the traditional system and ABC.