Question ONE:

Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows:

	Home	Work
Direct materials cost per unit	$ 40		$ 70
Direct labor cost per unit	25		30
Sales price per unit	354		572
Expected production per month	730	units	370	units

Harbour has monthly overhead of $185,030, which is divided into the following activity pools:

Setup costs	$ 77,000
Quality control	60,030
Maintenance	48,000
Total	$ 185,030

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

	Home	Work	Total
Number of setups	40	60	100
Number of inspections	340	350	690
Number of machine hours	1,200	2,000	3,200

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.
2. Calculate the production cost per unit for each of Harbours products under a traditional costing system.
3. Calculate Harbours gross margin per unit for each product under the traditional costing system.
4. Select the appropriate cost driver for each activity pool and calculate the activity rates if Harbour wanted to implement an ABC system.
5. Assuming an ABC system, assign overhead costs to each product based on activity demands.
6. Calculate the production cost per unit for each of Harbours products in an ABC system.
7. Calculate Harbours gross margin per unit for each product under an ABC system.
8. Compare the gross margin of each product under the traditional system and ABC.

ONE (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. Note: 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

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

	Home Work Unit Cost

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

	Home Work Gross Margin

FOUR (4): Select the appropriate cost driver for each activity pool and calculate the activity rates if Harbour wanted to implement an ABC system.

	Setup Costs Quality Control Maintenance

FIVE (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 Maintenance Total Overhead Cost

SIX (6):Calculate the production cost per unit for each of Harbours products in an ABC system. Note: Round your intermediate calculations and final answers to 2 decimal places.

	Home Work Unit Cost

SEVEN (7): Calculate Harbours gross margin per unit for each product under an ABC system. Note: Round your intermediate calculations and final answers to 2 decimal places.

	Home Work Gross Margin

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

	Home Work Gross Margin (Traditional) Gross Margin (ABC)

Question TWO:;

Hazelnut Corporation manufactures lawn ornaments. It currently has two product lines, the basic and the luxury. Hazelnut has a total of $167,582 in overhead.

The company has identified the following information about its overhead activity pools and the two product lines:

Activity Pools	Cost Driver	Cost Assigned to Pool	Quantity or Amount Consumed by Basic	Quantity or Amount Consumed by Luxury
Materials handling	Number of moves	$ 2,772	13	moves	53	moves
Quality control	Number of inspections	$ 29,610	240	inspections	120	inspections
Machine maintenance	Number of machine hours	$ 135,200	5,000	machine hours	5,400	machine hours

Required:

1. Suppose Hazelnut used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line.
2. Calculate the activity rates for each activity pool in Hazelnuts ABC system.
3. Calculate the amount of overhead that Hazelnut will assign to the basic line if it uses an ABC system.
4. Determine the amount of overhead Hazelnut will assign to the luxury line if it uses an ABC system.
5. Compare the results for a traditional system with that of an ABC system. Which do you think is more accurate?

ONE(1): Suppose Hazelnut used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. Note: Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.

	Basic Model Overhead Assigned Luxury Model Overhead Assigned

TWO (2): Calculate the activity rates for each activity pool in Hazelnuts ABC system. Note: Round your answers to the nearest whole dollar.

	Activity Rates Materials Handling per Move Quality Control per Inspection Machine Maintenance per Machine Hour

THREE (3): Calculate the amount of overhead that Hazelnut will assign to the basic line if it uses an ABC system. Note: Round your intermediate and final answers to the nearest whole dollar.

	Basic Model Materials Handling Quality Control Machine Maintenance Total Overhead Assigned

FOUR (4): Determine the amount of overhead Hazelnut will assign to the luxury line if it uses an ABC system. Note: Round your intermediate and final answers to the nearest whole dollar.

	Luxury Model Materials Handling Quality Control Machine Maintenance Total Overhead Assigned

FIVE (5): Compare the results for a traditional system with that of an ABC system. Which do you think is more accurate?

	Which do you think is more accurate?