Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows:     Home Work Direct materials cost per unit $ 36   $ 64   Direct labor cost per unit   22     38   Sales price per unit   365     579   Expected production per month   740  units   460  units     Harbour has monthly overhead of $187,875, which is divided into the following cost pools:          Setup costs $ 80,080 Quality control   61,595 Maintenance   46,200 Total $ 187,875     The company has also compiled the following information about the chosen cost drivers:     Home Work Total Number of setups 41 63 104 Number of inspections 320 315 635 Number of machine hours 1,700 1,600 3,300     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.)       Home Work Gross Margin $176.21 4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Harbour wanted to implement an ABC system.           Setup Costs Setups    Quality Control Inspections   Maintenance Machine Hours         5. Assuming an ABC system, assign overhead costs to each product based on activity demands.           Overhead Assigned To Home Overhead Assigned To Work Setup Costs     Quality Control     Maintenance     Total Overhead Cost $0 $0

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows:
 

  Home Work
Direct materials cost per unit $ 36   $ 64  
Direct labor cost per unit   22     38  
Sales price per unit   365     579  
Expected production per month   740  units   460  units
 

 

Harbour has monthly overhead of $187,875, which is divided into the following cost pools: 

 

     
Setup costs $ 80,080
Quality control   61,595
Maintenance   46,200
Total $ 187,875
 

 

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

  Home Work Total
Number of setups 41 63 104
Number of inspections 320 315 635
Number of machine hours 1,700 1,600 3,300
 

 

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.)

 
 
  Home Work
Gross Margin $176.21

4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Harbour wanted to implement an ABC system.

 
 
     
Setup Costs Setups   
Quality Control Inspections  
Maintenance Machine Hours

 

 

 

 
5. Assuming an ABC system, assign overhead costs to each product based on activity demands.

 

 

 
 
  Overhead Assigned To Home Overhead Assigned To Work
Setup Costs    
Quality Control    
Maintenance    
Total Overhead Cost $0 $0

 

 
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.)

 

 
 
  Home Work
Unit Cost  
 

 

 

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.)
 

 
 
  Home Work
Unit Cost  
 

 

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

 

 
 
  Home Work
Gross Margin (Traditional)    
Gross Margin (ABC)  
 
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