Harbour Company makes two models of electronic tablets, the Home and the Work. B
ID: 2420076 • Letter: H
Question
Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows:
Home
Work
Direct materials cost per unit
$
43
$
70
Direct labor cost per unit
17
38
Sales price per unit
350
578
Expected production per month
610
units
410
units
Harbour has monthly overhead of $182,750, which is divided into the following cost pools:
Setup costs
$
87,740
Quality control
61,410
Maintenance
33,600
Total
$
182,750
The company has also compiled the following information about the chosen cost drivers:
Home
Work
Total
Number of setups
36
71
107
Number of inspections
320
370
690
Number of machine hours
1,400
1,400
2,800
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 Costs
Quality Control
Maintebabce
Total Overhead Cost
Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows:
Explanation / Answer
Home Work Total Number of setups 36 71 107 Number of inspections 320 370 690 Number of machine hours 1,400 1,400 2,800 4 Cost Pool Total Cost$ Cost driver Total Activity Activity rate Set Up Costs 87,740 Number of setups 107 820.00 Quality control 61,410 Number of inspections 690 89.00 Maintenance 33,600 Number of machine hours 2,800 12.00 Total 182,750 5 Home Work Cost Pool Cost driver Activity rate Activity qty Overhead Assigned to Home Activity qty Overhead Assigned to Work Set Up Costs Number of setups 820 36 29,520 71 58,220 Quality control Number of inspections 89 320 28,480 370 32,930 Maintenance Number of machine hours 12 1,400 16,800 1,400 16,800 Total $ 74,800 $ 107,950
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