Selecting Cost Drivers, Assigning Costs Using Activity Rates

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. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.)

Sandy Beach Model
Rocky River Model
Total Overhead Cost

2. Calculate the production cost per unit for each of Kellers products under a traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.) Unit Cost: 3. Calculate Kellers 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: 4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Keller wanted to implement an ABC system. (Round your answers to 2 decimal places.)

Setup Costs
Quality Control
Maintenance

5. Assuming an ABC system, assign overhead costs to each product based on activity demands.(Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) Setup Costnot

Quality Controlnot

Maintenancenot

Total Overhead Cost

6. Calculate the production cost per unit for each of Kellers products with an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.) Unit Cost: 7. Calculate Kellers gross margin per unit for each product under an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.)

Gross Margin: 8. Compare the gross margin per unit of each product under the traditional system and ABC. (Round your answers to 2 decimal places.)

Gross Margin (Traditional)
Gross Margin (ABC)

Keller Company makes two models of battery-operated boats, the Sandy Beach and the Rocky River. Basic production information follows Sandy Rocky River Beach Direct materials cost per unit Direct labor cost per unit Sales price per unit Expected production per montlh $27.60 17.60 105.00 $18.70 13.20 82.40 1,190 units 960 units Keller has monthly overhead of $13,182, which is divided into the following cost pools Setup costs Quality control Maintenance $ 3,250 6,260 3,672 $ 13,182 Total The company has also compiled the following information about the chosen cost drivers Sand Beach Rocky River Total Number of setups Number of inspections Number of machine hours 10 100 1,700 40 435 1,700 50 535 3,400