Question

Keller Company makes two models of battery-operated boats, the Sandy Beach and the Rocky River. Basic production information follows: Sandy Beach $19.00 Rocky River $ 27.40 17.30 106.e0 Direct materials cost per unit Direct labor cost per unit Sales price per unit Expected production per month 14.60 82.30 1,210 units 910 units Keller has monthly overhead of S11,716, which is divided into the following cost pools: $ 2,135 5,626 3,955 $ 11,716 Setup costs Quality control Maintenance Total The company has also compiled the following information about the chosen cost drivers: Total Rocky River Sandy Beach 14 35 21 Number of setups 485 325 Number of inspections Number of machine hours 160 1,75e 3,500 1,750

Answer 1

			total oh	MH	mh's %	overhead
			a	b		assinged
1)	Sandy Beach Model		11,716	1,750	50%	5858
	Rocky river model		11,716	1,750	50%	5858
	total overhead costs			3,500
			overhead assigned
	Sandy Beach Model		5858
	Rocky river model		5858
2)				sandy	rocky
	Direct materials per unit			19.00	27.40
	direct labor per unit			14.60	17.30
	overhead per unit
	sandy			4.84
	Rocky				6.44
	unit cost			38.44	51.14	answer
3)	Gross margin
				sandy	rocky
	Sales price per unit			82.3	106
	unit product cost			38.44	51.14
	Gross margin			43.86	54.86	answer
			total cost	activity	rate	cost driver
4)			a	b	c=a/b
	Setup costs		2,135	35	61	per setup
	Quality control		5,626	485	11.6	per inspection
	maintenance		3,955	3,500	1.13	per machin hour
5)				overhead	overhead
				sandy	rocky
	Setup costs			854	1281
	Quality control			1856	3770
	maintenance			1977.5	1977.5
	total			4687.5	7028.5
6)				sandy	rocky
	Direct materials per unit			19.00	27.40
	direct labor per unit			14.60	17.30
	overhead per unit
	sandy			3.87
	Rocky				7.72
	unit cost			37.47	52.42	answer
7)	Gross margin
				sandy	rocky
	Sales price per unit			82.3	106
	unit product cost			37.47	52.42
	Gross margin			44.83	53.58	answer
				sandy	rocky
8)	Gross margin (Traditional)			43.86	54.86
	Gross margin (ABC)			44.83	53.58