Keller Company makes two models of battery-operated boats, the Sandy Beach and the Rocky River. Basic production information follows: Direct materials cost per unit Direct labor cost per unit Sales price per unit Expected production per month Sandy Beach $18.78 13.48 82.78 Rocky River $ 27.40 19.10 186.00 1,238 units 940 units Keller has monthly overhead of $12,324, which is divided into the following activity pools: Setup costs Quality control Maintenance Total $ 2,800 5,748 3,776 $ 12,324 The company also has compiled the following information about the chosen cost drivers: Sandy Beach Rocky River Number of setups 11 Number of inspections Number of machine hours 160 1,600 39 315 1,600 Total 50 475 3,200 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. 2. Calculate the production cost per unit for each of Keller's products under a traditional costing system. 3. Calculate Keller'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 Keller wanted to implement en 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 Keller's products with an ABC system. 7. Calculate Keller's gross margin per unit for each product under an ABC system. 8. Compare the gross margi of each product under the traditional system and ABC.
Keller Company makes two models of battery-operated boats, the Sandy Beach and the Rocky River. Basic production information follows: Direct materials cost per unit Direct labor cost per unit Sales price per unit Expected production per month Sandy Beach $18.78 13.48 82.78 Rocky River $ 27.40 19.10 186.00 1,238 units 940 units Keller has monthly overhead of $12,324, which is divided into the following activity pools: Setup costs Quality control Maintenance Total $ 2,800 5,748 3,776 $ 12,324 The company also has compiled the following information about the chosen cost drivers: Sandy Beach Rocky River Number of setups 11 Number of inspections Number of machine hours 160 1,600 39 315 1,600 Total 50 475 3,200 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. 2. Calculate the production cost per unit for each of Keller's products under a traditional costing system. 3. Calculate Keller'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 Keller wanted to implement en 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 Keller's products with an ABC system. 7. Calculate Keller's gross margin per unit for each product under an ABC system. 8. Compare the gross margi of each product under the traditional system and ABC.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Keller Company makes two models of battery-operated boats, the Sendy Beach and the Rocky River. Basic production information
follows:
Direct materials cost per unit
Direct labor cost per unit
Sales price per unit
Expected production per month
Sandy Beach
$18.78
13.48
82.78
1,238 units
Rocky River
$ 27.40
19.10
186.00
940 units
Keller has monthly overhead of $12,324, which is divided into the following activity pools:
Setup costs
Quality control
Maintenance
Total
$ 2,800
5,748
3,776
$ 12,324
The company also has complied the following information about the chosen cost drivers:
Sandy
Number of setups
Number of inspections
Number of machine hours
Beach
11
160
1,600
Rocky
River
39
315
1,600
Total
58
475
3,200
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.
2. Calculate the production cost per unit for each of Keller's products under a traditional costing system.
3. Calculate Keller'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 Keller 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 Keller's products with an ABC system.
7. Calculate Keller's gross margin per unit for each product under an ABC system.
8. Compare the gross margi of each product under the traditional system and ABC.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2 Required 3
Required 4
Required 5
Required 6
Required 7
Required B
Suppose Keller uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead
assigned to each product line.
Note: Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.
Sandy Beach Model
Overhead
Assigned
Rocky River Model
Total Overhead Cost
$
이
<Required 1
Required 2 >
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