The XYZ Company produces two of types widgets: standard and deluxe. The current cost system
applies OH on the basis of DL hours. Management is concerned about eroding profit margins on
the standard widgets. Information about the production process is presented below.
		standard	deluxe	total
quantity produced		8,650	990
selling price per widget		$83.00	$225.00
DM cost per widget		$18.75	$42.60
DL cost per widget		$10.00	$13.00
DL cost per hour		$19.00	$23.00
total OH (fixed cost)				$683,000

The president has asked you to do an ABC study to determine of the current accounting system
understates the gross margin on standard widgets. You find the following information about
the OH costs in an ABC context. Complete the template below showing the full manufacturing
cost per widget under ABC. (6 points)
cost category		cost	cost driver
production scheduling		$194,000	# production runs
facility lease		$288,000	# square feet
maintenance		$201,000	# machine hours
total		$683,000

		cost driver quantity
cost category		standard	deluxe
production scheduling		40	110
facility lease		3,300	6,200
maintenance		2,850	1,965
total		6,190	8,275
		standard	deluxe	total
price		$83.00	$225.00
DM		$18.75	$42.60
DL		$10.00	$13.00
production scheduling OH
facility lease OH
machine maintenance OH
gross profit
gross margin

What will be the overall gross margin (both product lines) if the number of production runs for the deluxe widgets is changed to 75?

gross margin