PA4-3 Selecting Cost Drivers, Assigning Costs Using Activity Rates [LO 4-1, 4-3,
ID: 2425026 • Letter: P
Question
PA4-3 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 $ 36 23 367 Work $ 66 Direct materials cost per unit Direct labor cost per unit Sales price per unit Expected production per month 32 584 330 units 690 units Harbour has monthly overhead of $189,925, which is divided into the following cost pools Setup costs Quality control Maintenance $ 89,250 55,675 45,000 Total $189,925 The company has also compiled the following information about the chosen cost drivers Number of setups Number of inspections Number of machine hours Home Work Total 105 320 335 655 1,500 1,500 3,000 64 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.) Overhead Assigned Home Model Work Model Total Overhead S CostExplanation / Answer
1. Overhead assigned :
Home : 94962.5
work: 94962.5
Total: 189925
2. Production cost per unit:
Home : $196.62
Work : $385.76 (189925 /2*330 = 287.76 + 66 + 32 = 385.76)
3. Gross margin per unit:
Home: 367-36-23= $308
Work: 584-66-32= $486
4. Appropriate driver and assigned rate:
Driver Rate
Setup costs No. of set ups 850
Quality control No. of Inspections 85
Maintenance No. of machine hours 15
5: Assigned overhead costs on ABC system:
Home Work
Setup costs 34850 54400
Quality control 27200 28475
Maintenance 22500 22500
Total 84550 105375
6.Production cost per unit by ABC system:
home: 181.53
work:417.32 (319.32 + 66 + 32)
7. Gross margin per unit as per ABC system:
Home: 367-36-23= $308
Work: 584-66-32= $486
8. the gross margin of each product under the traditional system and ABC:
home Work
Gross Margin (Traditional) 170.38 198.24
Gross Margin (ABC) 185.47 166.68
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