PA4-3 (Algo) Selecting Cost Drivers, Assigning Costs Using Activity Rates [LO 4-1, 4-3, 4-4, 4-6 ] Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows: Direct materials cost per unit Direct labor cost per unit Sales price per unit Expected production per month Home Work $ 44 $ 64 17 368 720 units 440 units 583 Harbour has monthly overhead of $163,080, which is divided into the following cost pools Setup costs Quality control Maintenance Total $ 74,880 58,500 29,700 $163,080 The company has also compiled the following information about the chosen cost drivers: Home Work Total Number of setups 395796 Number of inspections 330 320 650 Number of machine hours 1,600 1,100 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. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.) Home Model: Work Model: Total Overhead Cost Overhead Assigned $ 96,640 66,440 163,080 2. Calculate the production cost per unit for each of Harbour's products under a traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.) Home $ 195.22 Work $ 251.00 Unit Cost 3. Calculate Harbour's gross margin per unit for each product under the traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.) Gross Margin Home Work $ 172.78 $ 332.00 4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Harbour wanted to implement an ABC system. Setup Costs Quality Control Maintenance Setups Inspections Machine Hours 5. Assuming an ABC system, assign overhead costs to each product based on activity demands. s Setup Costs Quality Control Maintenance Total Overhead Cost Overhead Assigned To Home 30,420 29,700 $ 17,600 $ 77,720 Overhead Assigned To Work $ 44,460 $ 28,800 $ 12.100 $ 85,360 5. Assuming an ABC system, assign overhead costs to each product based on activity demands. Setup Costs Quality Control Maintenance Total Overhead Costs Overhead Assigned To Home 30,420 29,700 S 17,600 77,720 Overhead Assigned To Work $ 44,460 28,800 $ 12.100 $ 85,360 6. Calculate the production cost per unit for each of Harbour's products in an ABC system. (Round your Intermediate calculations and final answers to 2 decimal places.) Home $ 168.945 Work 294.00 Unit Cost 7. Calculate Harbour's gross margin per unit for each product under an ABC system. (Round your Intermediate calculations and final answers to 2 decimal places.) Home Work Gross Margin 8. Compare the gross margin of each product under the traditional system and ABC. (Round your answers to 2 decimal places.) Home Work Gross Margin (Traditional) Gross Margin (ABC)
