Keller Company makes two models of battery-operated boats, the Sandy Beach and the Rocky River. Basic production information follows:     Sandy Beach Rocky River Direct materials cost per unit $ 19.60   $ 27.00   Direct labor cost per unit   15.00     18.10   Sales price per unit   82.80     105.00   Expected production per month   1,240  units   900  units          Keller has monthly overhead of $12,053, which is divided into the following cost pools:         Setup costs $ 2,900 Quality control   6,195 Maintenance   2,958 Total $ 12,053     The company has also compiled the following information about the chosen cost drivers:     Sandy Beach Rocky River Total Number of setups 11 39 50 Number of inspections 100 425 525 Number of machine hours 1,450 1,450 2,900 4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Keller wanted to implement an ABC system. (Round your answers to 2 decimal places.)           Setup Costs Setups   Quality Control Inspections   Maintenance Machine Hours 5. Assuming an ABC system, assign overhead costs to each product based on activity demands.(Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)   Overhead Assigned To Sandy Beach Overhead Assigned To Rocky River Setup Cost     Quality Control     Maintenance     Total Overhead Cost $0 $0 6. Calculate the production cost per unit for each of Keller’s products with an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.)       Sandy Beach Rocky River Unit Cost

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Keller Company makes two models of battery-operated boats, the Sandy Beach and the Rocky River. Basic production information follows:
 

  Sandy Beach Rocky River
Direct materials cost per unit $ 19.60   $ 27.00  
Direct labor cost per unit   15.00     18.10  
Sales price per unit   82.80     105.00  
Expected production per month   1,240  units   900  units
 

      

Keller has monthly overhead of $12,053, which is divided into the following cost pools:

 

     
Setup costs $ 2,900
Quality control   6,195
Maintenance   2,958
Total $ 12,053
 

 

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

 

  Sandy Beach Rocky River Total
Number of setups 11 39 50
Number of inspections 100 425 525
Number of machine hours 1,450 1,450 2,900

4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Keller wanted to implement an ABC system. (Round your answers to 2 decimal places.)

 
 
     
Setup Costs Setups  
Quality Control Inspections  
Maintenance Machine Hours

5. Assuming an ABC system, assign overhead costs to each product based on activity demands.(Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)

  Overhead Assigned To Sandy Beach Overhead Assigned To Rocky River
Setup Cost    
Quality Control    
Maintenance    
Total Overhead Cost $0 $0


6. Calculate the production cost per unit for each of Keller’s products with an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.)

 
 
  Sandy Beach Rocky River
Unit Cost  


7. Calculate Keller’s gross margin per unit for each product under an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.)

 
 
  Sandy Beach Rocky River
Gross Margin  


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

 
 
 
  Sandy Beach Rocky River
Gross Margin (Traditional)    
Gross Margin (ABC)  
 
 
 
 
 
 
 
 
 
 
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