Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows: $ 65 Direct materials cost per unit Direct labor cost per unit Sales price per unit 35 572 Expected production per month 340 units Harbour has monthly overhead of $177,870, which is divided into the following activity pools: Setup costs Quality control Maintenance Total $ 72,000 66,270 39,600 $ 177,870 Number of setups Number of inspections Number of machine hours Home 41 320 1,200 Home $38 20 354 790 units The company also has compiled the following information about the chosen cost drivers: Work 49 385 2,100 Work Total 90 705 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. 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.
Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows: $ 65 Direct materials cost per unit Direct labor cost per unit Sales price per unit 35 572 Expected production per month 340 units Harbour has monthly overhead of $177,870, which is divided into the following activity pools: Setup costs Quality control Maintenance Total $ 72,000 66,270 39,600 $ 177,870 Number of setups Number of inspections Number of machine hours Home 41 320 1,200 Home $38 20 354 790 units The company also has compiled the following information about the chosen cost drivers: Work 49 385 2,100 Work Total 90 705 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. 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text: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
Harbour has monthly overhead of $177,870, which is divided into the following activity pools:
Setup costs
Quality control
Maintenance
Total
$ 72,000
66,270
39,600
$ 177,870
Number of setups
Number of inspections
Number of machine hours
Home
$38
20
354
790 units
Home
Work
49
41
320
1,200 2,100
385
The company also has compiled the following information about the chosen cost drivers:
Work
Total
90
705
3,300
$65
35
572
340 units
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.
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