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

$

19.50

 

$

27.20

 

Direct labor cost per unit

 

13.40

 

 

18.70

 

Sales price per unit

 

83.50

 

 

106.00

 

Expected production per month

 

1,230

 units

 

910

 units

      
Keller has monthly overhead of $11,307, which is divided into the following cost pools:
 

 

 

 

Setup costs

$

1,995

Quality control

 

5,640

Maintenance

 

3,672

Total

$

11,307

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

 

Sandy Beach

Rocky River

Total

Number of setups

14

21

35

Number of inspections

130

340

470

Number of machine hours

1,700

1,700

3,400

 

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. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.)

Overhead Assigned

Sandy Beach Model

Rocky River Model

Total Overhead Cost

$

2. Calculate the production cost per unit for each of Keller’s products under a traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.)

Sandy Beach

Rocky River

Unit cost

3. Calculate Keller’s gross margin per unit for each product under the traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.)

Sandy Beach

Rocky River

Gross Margin

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

Quality Control

Maintenance

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

$

$

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)

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

$

19.50

$

27.20

Direct labor cost per

unit

13.40

18.70

Sales price per unit

83.50

106.00

Expected production

per month

1,230

units

910

units

Keller has monthly overhead of $11,307, which is divided into the following

cost pools:

Setup costs

$

1,995

Quality control

5,640

Maintenance

3,672

Total

$

11,307

The company has also compiled the following information about the chosen

cost drivers:

Sandy Beach

Rocky River

Total

Number of setups

14

21

35

Number of inspections

130

340

470

Number of machine hours

1,700

1,700

3,400

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.

(Do

not

round

intermediate

calculations

and

round

your

final

answers

to

the

nearest

whole

dollar

amount.

)

Overhead Assign

ed

Sandy Beach Model

Rocky River Model

Total Overhead Cost

$

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
$ 19.50 $ 27.20
Direct labor cost per
unit
13.40 18.70
Sales price per unit 83.50 106.00
Expected production
per month
1,230 units 910 units

Keller has monthly overhead of $11,307, which is divided into the following
cost pools:

Setup costs $ 1,995
Quality control 5,640
Maintenance 3,672
Total $ 11,307

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

Sandy Beach Rocky River Total
Number of setups 14 21 35
Number of inspections 130 340 470
Number of machine hours 1,700 1,700 3,400

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. (Do not round intermediate calculations and round your final answers
to the nearest whole dollar amount.)
Overhead Assigned
Sandy Beach Model
Rocky River Model
Total Overhead Cost $