Reference no: EM132963550

Question - Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows:

Home Work

Direct materials cost per unit $41 $65

Direct labor cost per unit 24 36

Sales price per unit 361 580

Expected production per month 630 units 320 units

Harbour has monthly overhead of $189,695, which is divided into the following cost pools:

Setup costs $82,680

Quality control 67,415

Maintenance 39,600

Total $189,695

The company has also compiled the following information about the chosen cost drivers:

Home Work Total

Number of setups 44 62 106

Number of inspections 330 365 695

Number of machine hours 1,400 1,900 3,300

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.)

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.)

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.)

4. Select the appropriate cost driver for each cost 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. (Round your intermediate calculations and final answers to 2 decimal places.)

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.)

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