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 $ 39 20 362 $ 72 30 569 710 units 370 units Harbour has monthly overhead of $176,500, which is divided into the following activity pools: Setup costs Quality control Maintenance Total $ 79,540 57,960 39,000 $ 176,500 The company also has compiled the following information about the chosen cost drivers: Number of setups Number of inspections Number of machine hours Home 40 310 1,600 Work 57 380 1,000 Total 97 690 2,600 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 Harbour's products under a traditional costing system. 3. Calculate Harbour's 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 Harbour's products in an ABC system. 7. Calculate Harbour's 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.