Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows: Home Work
Direct materials cost per unit $38 $72
Direct labor cost per unit 23 40
Sales price per unit 359 573
Expected production per month 620 units 490 units

Harbour has monthly overhead of $180,660, which is divided into the following cost pools:

Setup costs $80,840
Quality control 68,620
Maintenance 31,200
Total $180,660

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

Home Work Total
Number of setups 41 53 94
Number of inspections 320 410 730
Number of machine hours 1,200 1,400 2,600

Required:
a. Suppose Harbour uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line.
b. Calculate the production cost per unit for each of Harbour's products under a traditional costing system.
c. Calculate Harbour's gross margin per unit for each product under the traditional costing system.

Instructions are below.

Explanation:

a)

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 180,660/2,600

Predetermined manufacturing overhead rate= $69.49 per machine hour

Now, we can allocate overhead to each product line:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Home= 69.49*1,200= $83,388

Work= 69.49*1,400= $97,286

b) We need to determine the unitary cost for each product:

Home:

Unitary cost= 38 + 23 + (83,388/620)= $195.50

Work:

Unitary cost= 72 + 40 + (97,286/490)= $310.54

c) Gross margin= selling price - unitary cost

Home:

Gross margin= 359 - 195.5= $163.4

Work:

Gross margin= 573 - 310.54= $262.46

income statement is prepared in order to show the profits and loss of a business. in order to prepare the income statement she should collect all the income and expenses of the product with the cost of production.

answer; risk transference;