Summit Company makes two models of snowboards, the Junior and the Expert. Its basic production information follows:

Summit has monthly overhead of $484,746, which is divided into the following cost pools:

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

Required:
1. Suppose Summit 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 production cost per unit for each of Summit’s products under a traditional costing system.
3. Calculate Summit’s gross margin per unit for each product under the traditional costing system.
4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Summit 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 Summit’s products with an ABC system.
7. Calculate Summit’s gross margin per unit for each product under an ABC system.
8. Compare the gross margin of each product under the traditional system andABC.

Transcribed Image Text:

Junior Expert Direct materials cost per unit Direct labor cost per unit Sales price per unit Expected production per month 92 51 390 4,000 units $115 75 615 9,000 units Setup costs Quality control Maintenance Engineering $136,364 163,020 78,840 106,522 $484,746 Total Junior Total Number of setups required Number of inspections Number of machine hours Number of engineering hours 60 975 350 352 Expert 86 675 650 612 146 1,650 1,000 964 9