–

PA4-3 (Algo) Selecting Cost Drivers, Assigning Costs Using Activity Rates [LO 4-1, 4-3, 4-4, 4-6 ]

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

 

23

 

 

40

 

Sales price per unit

 

357

 

 

566

 

Expected production per month

 

680

 units

 

490

 units

Harbour has monthly overhead of $185,900, which is divided into the following cost pools: 

 

 

 

Setup costs

$

77,600

Quality control

 

69,300

Maintenance

 

39,000

Total

$

185,900

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

 

Home

Work

Total

Number of setups

36

61

97

Number of inspections

330

370

700

Number of machine hours

1,100

1,500

2,600

 

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.)

Overhead Assigned

Home Model:

Work Model :

Total Overhead Cost

$

 
 
 
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.)

Home

Work

Unit Cost

 

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

Unit cost

 

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

Quality Control

Maintenance

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

Overhead Assigned to Home

Overhead Assigned to work

Setup cost

Quality Control

Maintenance

Total overhead Cost

$

$

 
 

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

Gross Margin

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)

PA4

–

3 (Algo) Selecting Cost Drivers, Assigning Costs Using

Activity Rates [LO 4

–

1, 4

–

3, 4

–

4, 4

–

6 ]

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

23

40

Sales price per unit

357

566

Expected production per

month

680

units

490

units

Harbour has monthly overhead of $185,900, which is divided into the following

cost pools:

Setup costs

$

77,600

Quality control

69,300

Maintenance

39,000

Total

$

185,900

The company has also compiled the following information about the chosen

cost drivers:

Home

Work

Total

Number of setups

36

61

97

Number of inspections

330

370

700

Number of machine hours

1,100

1,500

2,600

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

.)

Overhead Assigned

Home

Model:

Work Model :

Total Overhead Cost

$

PA4-3 (Algo) Selecting Cost Drivers, Assigning Costs Using
Activity Rates [LO 4-1, 4-3, 4-4, 4-6 ]
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
23 40
Sales price per unit 357 566
Expected production per
month
680 units 490 units

Harbour has monthly overhead of $185,900, which is divided into the following
cost pools:

Setup costs $ 77,600
Quality control 69,300
Maintenance 39,000
Total $ 185,900

The company has also compiled the following information about the chosen
cost drivers:
Home Work Total
Number of setups 36 61 97
Number of inspections 330 370 700
Number of machine hours 1,100 1,500 2,600

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.)
Overhead Assigned
Home Model:
Work Model :
Total Overhead Cost $