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 $ 36 $ 69 21 31 361 583 700 units 380 units Harbour has monthly overhead of $183,770, which is divided into the following cost pools: Setup costs Quality control Maintenance Total $ 85,490 54,780 43,500 $183,770 The company has also compiled the following information about the chosen cost drivers: Number of setups Number of inspections Number of machine hours Home 40 310 1,300 Work 63 350 1,600 Total 103 660 2,900 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: Overhead Assigned $ 82,380 $ 101,390 183,770 Work Model: Total Overhead Cost CA 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 Work 366.82 Unit Cost 174.69 $ 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.) Home Work Gross Margin $ 186.31 $ 216.181 4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Harbour wanted to implement an ABC system. $ 830 Setup Costs Quality Control Setups Inspections $ 83 Maintenance Machine Hours $ 15 5. Assuming an ABC system, assign overhead costs to each product based on activity demands. Overhead Assigned To Home Overhead Assigned To Work Setup Costs Quality Control Maintenance Total Overhead Cost $ 0 $ 0 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 Work 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)
