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	$ 18.30		$ 26.30
Direct labor cost per unit	13.90		17.40
Sales price per unit	83.00		106.00
Expected production per month	1,220	units	1,000	units

Keller has monthly overhead of $11,174, which is divided into the following activity pools:

Setup costs	$ 2,030
Quality control	6,260
Maintenance	2,884
Total	$ 11,174

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

	Sandy Beach	Rocky River	Total
Number of setups	13	22	35
Number of inspections	190	345	535
Number of machine hours	1,400	1,400	2,800

Required:

Suppose Keller uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line.

Calculate the production cost per unit for each of Kellers products under a traditional costing system.

Calculate Kellers gross margin per unit for each product under the traditional costing system.

Select the appropriate cost driver for each activity pool and calculate the activity rates if Keller wanted to implement an ABC system.

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

Calculate the production cost per unit for each of Kellers products with an ABC system.

Calculate Kellers gross margin per unit for each product under an ABC system.

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

\begin{tabular}{|l|c|} \hline & OverheadAssigned \\ \hline Sandy Beach Model & \\ \hline Rocky River Model & \\ \hline Total Overhead Cost & $ \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline & Sandy Beach & Rocky River \\ \hline Unit Cost & & \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline & Sandy Beach & Rocky River \\ \hline Gross Margin & & \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline Setup Cost & & \\ \hline Quality Control & & \\ \hline Maintenance & & \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline & Sandy Beach & Rocky River \\ \hline Unit Cost & & \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline & Sandy Beach Rocky River \\ \hline Gross Margin & & \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline & Sandy Beach & Rocky River \\ \hline Gross Margin (Traditional) & & \\ \hline Gross Margin (ABC) & & \\ \hline \end{tabular}